SW Radio Africa (London)
Henry Makiwa
7 September 2007
Zimbabwe on Thursday devalued the local currency from Z$250 to Z$30 000 against the US dollar in a Z$37 trillion supplementary budget that fell far short of rectifying the country's economic underperformance.
On the black market the currency is trading at above Z$240 000 to the US dollar, while the British pound and South African rand were trading above Z$500 000 and Z$35 000 respectively. So the devaluation has done very little to bring the dollar into line with reality.
Figures tabled by Finance Minister Samuel Mumbengegwi show that Zimbabwe will incur a budget deficit of Z$11 trillion.
The original 2007 budget deficit projection by former Finance Minister Herbert Murerwa was Z$4 trillion.
On Thursday Mumbengegwi also raised the tax-free threshold for the country's suffering workers but failed to address funding requests by various ministries that submitted bids amounting to Z$250 trillion.
Economic analyst John Robertson said the devaluation was driven by the scarcity of foreign currency and activities on the black market, rather than the government's own will to solve the country's inflation.
He said: "The government has now admitted that they cannot bring inflation under control. The raising of the tax-free threshold will be of some help but because of the price freeze, producers and retailers are prohibited from offering their goods on the market. People will not reap much benefit then because what is needed more is to have the producers back on the market; instead they are prosecuted by controls."
Mumbengegwi also allocated Z$36 billion to the National Incomes and Pricing Commission that is mandated to approve or turn down any requests for price hikes by businesses.
Finance journalist Clemence Munyukwe said the budget would fan activity on the black market. "This is just going to encourage the black market and it will have no impact on reducing inflation.
The fluctuations will make it even harder for Zimbabwe to import vital food and raw materials. The country's stricken business community has been desperate for the government to relent on a demand that shops and businesses slash prices, often to below the cost of production. When all is said, this spells doom," Munyukwe said.
Mumbengegwi also allocated Z$735 billion for next year's elections and Z$347 billion for food. He said 600 000 households need food aid.
In addition, he said he would also broaden the list of luxury goods that attract duty in foreign currency.
Meanwhile, reports from Harare say that divisions between Mumbengegwi and Reserve Bank of Zimbabwe Governor Gideon Gono deepened after the former devalued the local currency. Gono boycotted Mumbengegwi's presentation in Parliament, the first time he has done so since he became Governor in December 2003.
Gono and Mumbengegwi have clashed on several occasions. Recently cabinet had to intervene and compel Gono to print Z$100 trillion to meet civil servants' salary increments, after the central bank chief had turned down the request from Mumbengegwi.
Be the first to Write a Comment!
Copyright © 2007 SW Radio Africa. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
