Devaluation by another name

• Reserve Bank shoot down devaluation hopes

• Inflation rockets to 2 200 percent

• Western Union resumes Zimbabwe transfers

• Zimbabwe delays release of inflation figures

• Zimbabwe charges duty in forex on car imports

• Zimbabwe's inflation races to 1730%

• Zimbabwe posts budget deficit of $47,9 billion

• RBZ rolls out $5 000 and $50 000 notes

• Letter from United States ambassador

• Zimbabwe's inflation hits 1 593%

• 2006 Year End Monetary Policy Statement

• Mutambara: the end of thing by Mugabe regime

• RBZ lifts restrictions on foreign currency transfers

• Biti: failure is the only option

• Gono: 'devaluation will bless parallel market'

• RBZ cuts money supply to stem inflation

• Interest rates unchanged at 500%

• RBZ refuses to devalue currency

• Zim inflation hits new record

By a Special Correspondent

"THERE is not going to be an exchange rate movement from 250 to the US dollar. There is no devaluation," thundered Reserve Bank governor Gideon Gono, as he presented his monetary statement on Thursday.

For many listening, it appeared that was that: no devaluation.

But read closely, Gono's monetary statement reveals there has been a devaluation through the back door, only by another name.

Gono announced a fund that would see Zimbabwe's beleaguered currency being traded at Z$15,000 to the US dollar.

The governor announced the establishment of a Drought Mitigation and Economic
Stabilisation Fund (DMESF) that would allow individuals and organisations to sell foreign currency to the RB through authorised dealers such as banks, the RBZ’s Homelink scheme or registered Money Transfer Agents at the going exchange rate of Z$250 to the US dollar, multiplied by 60.

Yet Gono was at pains to emphasise that the Zimbabwe dollar had not been devalued to the packed Large City Hall in Bulawayo, the first time he has presented the monetary policy outside Harare.

Effectively, this means that the rate at which a seller of forex would be paid would stand at Z$15,000 to the US dollar. This money would be paid out from the Drought Fund, backed by a Drought Mitigation and Economic Stabilisation Bond. The parallel market rate currently stands at Z$25,000 to the dollar.

Analysts said the Drought Fund was a smokescreen that was being used to disguise the fact that the Zimbabwe government was desperate for foreign currency, while remaining stoic when it came to devaluation.

“This is designed to mop up foreign currency that is still finding its way into the parallel market," said a top banker who declined to be identified.

“The fact remains that all the forex raised will all be going to the Reserve Bank and it remains to be seen whether sellers will take the bait."

Expectations were high in the market that the governor would indeed devalue, though most were pessimistic given President Robert Mugabe’s opposition to outright devaluation.

Mugabe is on record as having displayed disdain for those who followed what he termed "bookish economics".

Before his announcement, Gono met Mugabe for close to two hours on Wednesday. Mugabe was expected on Friday in Bulawayo for the official opening of the Trade Fair.

Many will be asking today, "when is devaluation not devaluation?" The simple answer to that is, "when Mugabe is your boss".

Prices of fuel, beer and other commodities shot up on the eve of the monetary statement with traders anticipating a price freeze along with the long awaited social contract.

In the statement, Gono raised the gold support price from the current
Z$16,000 per ram to Z$350,000 to shore up dwindling bullion reserves and to rekindle an ailing gold mining sector which has been hard hit by a punitive police dragnet, closures and rampant smuggling.

Gono also rescuscitated the Diamond and Gold Smuggling whistle blowers fund to stem what he termed leakages of precious metals. Zimbabwe has experienced an unprecedented diamond rush in the Eastern Highlands after diamonds were discovered there late last year. The incentive will see whistle blowers receiving 5% of the value of actual prosecuted recoveries from their reported cases.

Restive tobacco farmers also received some respite from the governor when he unveiled a top-up of Z$40,000 for every kilogram that fetched a price of US$1,50 per kg. This was effective immediately.

Farmer will also get a back pay for the 2005/2006 selling season top-up bonus which was promised to them but never honoured. This bonus translates to Z$85 per kilogram of tobacco, a total of Z$5 billion on the 55 million kilograms delivered in 2006.

Concluding his hour long presentation, Dr Gono made an impassioned plea for the removal of sanctions. He appealed to Zimbabweans to help bring to the attention to the world of what he termed as "the devastating effects of declared and undeclared sanctions" were having on the Zimbabwean economy and the man in the street.

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