RBZ devalues Zimbabwe dollar by 40%

RBZ devalues Zimbabwe dollar by 40%

GIDEON Gono

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By Staff Reporter

ZIMBABWE'S central bank on Thursday massively devalued the local currency in a bid to increase inflows of scarce foreign currency as the country battles to find hard cash to pay for fuel, food and electricity.

The Zimbabwe dollar was devalued by 40 percent from around 12 500 to 17 500 to the US dollar, Reserve Bank of Zimbabwe (RBZ) Governor Gideon Gono announced in a monetary policy statement.

"The rate that's now going to be given to exporters is 17 500 per US dollar," Gono said, adding that the same rate would apply to anyone who exchanges foreign currency at commercial banks in Zimbabwe.

The devaluation is the second in just two months. In May Gono announced a devaluation from 6 400 to 10 000 Zimbabwe dollars to the greenback. The central bank later said anyone changing hard cash with local banks would be given a 25 percent bonus, taking the effective rate of exchange to 12 500 to the US currency.

However, the new rate is still significantly less than the black market rate for the US dollar, which is reported to be around 25 000 Zimbabwe dollars.

Gono said the devaluation was one of several "bold moves" Zimbabwe is taking to halt the country's economic decline.

Zimbabwe's economy has experienced more than five years of economic recession. Annual inflation is currently estimated at more than 164 per cent and is one of the highest rates in the world.

Gono said battling inflation would continue to be a priority. He promised inflation would start to tail off by September, and was optimistic about reducing it to double digits by year-end.

News of the devaluation comes amid reports that the Zimbabwe government has been making efforts to secure a loan from its economically powerful neighbour, South Africa.

Zimbabwe has not been granted international loans for several years, mainly due to concerns from Western donor nations over the government's human rights record.

Harare owes the International Monetary Fund (IMF) around $300-million, and there have been unconfirmed reports that Zimbabwe is in imminent danger of expulsion from the international lender over the unpaid debt.

But Gono said Thursday the RBZ was now repaying the IMF $9-million every three months, up from $1,5-million every quarter.

In a surprise move Gono also announced that the RBZ would designate fuel stations throughout the country that would sell fuel for one US dollar per litre in order to ease a critical shortage that has seen no significant fuel deliveries in Zimbabwe for the past two months.

Zimbabwe's foreign currency market is tightly regulated, but Gono said "no questions will be asked as to where one got his or her foreign currency" to buy fuel.

Thursday's edition of the state-controlled Herald reported that Zimbabwe's national airline has had to cancel international and domestic flights due to shortages of jet fuel. - Sapa-dpa
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