FOREIGN currency inflows for the first four months of 2005 dropped significantly compared last year, throwing into disarray RBZ governor Gideon Gono’s year-end target of US$3,1 billion.
This emerged as Gono yesterday flatly refused a wholesale devaluation of the Zimbabwean dollar which he said would unduly increase the price of imports and further stoke up inflation.
His anti-devaluation stance, also shared by President Robert Mugabe, goes against market sentiment that the local currency is overvalued.
”Inevitably, devaluation, which can happen at the stroke of a pen, does not only bring with it a sensation of mixed emotions, but we firmly believe it is not the ‘be it all’ answer to our challenges. Foreign exchange inflows are not as elastic to devaluation as some would want us to believe,” Gono said.
He settled for the less controversial sectoral devaluation of the diaspora rate which he slashed to $9 000: US$1 up from $6 200:US$1 in a bid to tap forex from non-traditional markets. Experts say it is an indirect form of devaluation because the auction rate will always track the diaspora rate.
The market says the Zimbabwe dollar should be devalued to narrow the widening gap between the official and parallel market since 2000.
Figures released by Gono in his monetary policy review show that the economic decline has significantly reduced forex earnings in the past four months compared to the same period last year.
The whole economy managed to raise US$385,7 million in the first four months compared to US$448,6 raised in the same period last year.
Foreign currency earned from gold exports in the same period slid to US$80,4 million from US$90,7 million raised last year.
Receipts from the diaspora in the same period also plunged to US$13,6 from last year’s US$49,1 million. Analysts say this shows that people in the diaspora are no longer enthusiastic about the Homelink project because of the depressed rates offered by the central bank.
The reduced earnings in the Homelink could have forced Gono to devalue the dollar for that market.
Analysts said selective devaluation might be too little to sway people in the diaspora who have since ditched Homelink for the more lucrative parallel market where they are offered a rate of $24 000:US$1 and as much as $35 000 for the British pound.
Experts say the depressed start to the inflows indicates that Gono’s foreign currency targets are unachievable because of the economic crisis that continues unabated. They say his predictions are not tempered by economic realities.
Earnings on the foreign currency auction have also declined on last year. During the first four months the auction market raised US$284,2 million compared to US$305,7 million during the same period last year.
It is expected that the parallel market will continue to gallop away from the auction market, which has been largely stagnant for the past six months courtesy of the central bank’s control.
Meanwhile, government expenditure continues to take a significant chunk of the foreign currency raised. Of the US$385,7 million raised so far government has gobbled US$110,8 million. It is second to auction payment to other sectors, which took up US$175,8 million.
About US$48 million went towards repayment of government’s debt to foreign banks and the International Monetary Fund. Government has paid US$43,3 to Afreximbank and US$5 million to the IMF this year.