The Zimbabwe dollar took a dramatic plunge yesterday, on the eve of President Robert Mugabe’s 84th birthday falling by more than a 100 percent. Foreign currency dealers say the Zimbabwe dollar was trading around $16 million to the United States dollar on an illegal but flourishing black market for hard cash on Wednesday afternoon and as much as $20 million for larger amounts.
From our correspondent in Harare
The local dollar trades at $30 000 to the greenback on the official market. However the bulk of foreign currency trade takes place on the parallel market, with the Reserve Bank of Zimbabwe (RBZ), a frequent visitor to the market to raise hard cash for critical imports.
Dealers at the notorious Roadport in Harare said the central bank had
entered the market on Wednesday, midday, to source foreign currency for electricity, food and fuel for the March 29 elections and to repay exporters after raiding some accounts last month.
Shortages of food, fuel, foreign currency are all signs of a crippling economic crisis that many say has roots in Mugabe’s controversial populist policies such as seizing land from whites to resettle blacks and lately threats to expropriate foreign-owned companies. “We are buying (US) dollars in the market and that seems to have driven the exchange rate,” commented a central bank source. “There has been a sudden weakening of the Zimbabwe dollar this week and patterns suggest that the RBZ is in the market, in fact they are buying foreign currency,” Musa Dhlomo a foreign currency trader said.
An official with an exporting company said the firm was unable to get money banked with the central bank for more than three weeks because the RBZ had used the funds, raising fears the money would take time to be returned. Foreign currency accounts for exporters and non-governmental organisations with local banks are now held at the central bank and not with foreign corresponding foreign banks as was the case previously.
With falling export revenue – including revenue from gold, which contributes a third of all export income but whose output dropped to pre-independence levels in 2007 – central bank chief Gideon Gono is hard pressed to raise foreign currency on the thriving parallel market to meet an ever expanding import bill.
Central Statistical Office yesterday revised inflation rate to 100 580.2 percent in January, the highest in the world. “The year-on-year inflation rate for the month of January 2008, as measured by the all items Consumer Price Index (CPI) stood at 100,580.2 per cent, gaining 34,367.9 percentage points on the December rate of 66,212.3 per cent,” the Central Statistical Office (CSO) said.
Gideon Gono, who bustled in glory during his first three months in office in 2004 after shaking up the financial sector –- is Mugabe’s point man on the economy — but his earlier optimism and rallying cry, “failure is not an option” have all but failed to lift Zimbabwe from an economic quagmire.