IN a major policy shift President Robert Mugabe has finally succumbed and now agrees that the Zimbabwe dollar needs to be devalued for the country to enjoy the fruits of
Mugabe, who has vowed that anyone talking devaluation was an economic saboteur, gave in on Heroes Day when he addressed thousands gathered at the National Heroes Acre to commemorate the annual event.
Simba Makoni former Finance and Economic Development minister fell out of favour with Mugabe and his cabinet colleagues when he told them that the dollar was over-valued, was killing the economy, and needed to be devalued.
Makoni was immediately offloaded from Mugabe’s “gravy train” and replaced with Herbert Murerwa, a former High Commissioner to the United Kingdom.
While not specifically saying by how much the nation’s currency would be devalued, Mugabe said it had been agreed under the National Economic Revival Programme that government would “review quarterly” the rate of the Zimbabwe dollar.
“Various measures have been adopted to support sectors with the potential for generating foreign currency,” Mugabe said. “The Export Support Scheme and the Export and Productive Sector Finance facilities are meant to support productive sectors that encourage exports. Through these schemes, the government has made available resources amounting to $60 billion.”
He said resources under these facilities were being accessed at 5% for exporters while the productive facility would be accessed at 15%.
Government had also introduced an Export Support Rate of one United States dollar to $824.
“As highlighted in the Economic Revival Programme, the rate will be reviewed quarterly, taking into account macro-economic developments,” the president said.
The business community has come out strongly against government’s slow pace to devalue the dollar against the world’s major currencies, saying this was stifling competitiveness and was affecting various sectors including manufacturing, mining, tourism, and agriculture.
The dollar is officially pegged at $824 against the US greenback, $1 300 against the pound, $105 against the rand and $160 to the pula. It is however going for as much as $3 500 against the US dollar, $5000 against the pound, $350 to the rand and $400 to the pula on the parallel market.
Two weeks ago the Washington-based International Monetary Fund (IMF) released a six-page damning report on the country’s deteriorating economic situation, saying if Mugabe did not move quickly to try and salvage the situation the Fund would not re-instate the nation’s voting and related rights.
The IMF pointed out that while the recent adjustment of the official exchange rate from $55 against the greenback to $824 was welcome, it regretted that government transactions continued to be undertaken at a more appreciated exchange rate, which could result in significant distortions and quasi-fiscal losses.
They emphasised the need to follow up with further rate adjustments to stem the sharp erosion of external sector competitiveness.
“The ultimate goal should be to unify the exchange rates as quickly as possible, liberalise the exchange system, and eventually eliminate surrender requirements,” the IMF said.
The IMF directors urged government to step up efforts to liberalise Zimbabwe’s external trade.