Govt "forced " to allow fuel stations to trade in US currency

Fuel and foreign currency shortages have forced the Zimbabwean government to allow service stations to sell fuel in US currency, according to economists. Almost all sectors of the economy have been grounded by the unprecedented crisis. The foreign currency deficit has prevented the country from procuring fuel on international markets or servicing its ballooning debts. In a monetary review statement, Reserve Bank Governor Gideon Gono said a number of service stations have been selected to sell fuel in hard currency from 1 August. Petrol (gasoline) will cost US $1 per litre. Gono also announced other measures to encourage the flow of foreign currency into the Zimbabwean economy. He said individuals and companies with offshore accounts should repatriate their money and open accounts in the country, and assured them that they would not be prosecuted for externalising foreign currency. "Holders of free funds offshore sources are, therefore, with immediate effect, free to bring in imports, particularly those of a productive nature, on a no-questions-asked basis," Gono declared. Describing the new measures as an attempt to flush out foreign currency, economist John Robertson commented, "The authorities have exhausted options to control the flow of foreign currency into Zimbabwe - they are accepting the existence of the parallel currency." Harare owes the International Monetary Fund (IMF) more than US $300 million, but Gono said the country had stepped up efforts to reduce its arrears, making a payment of US $9 million per quarter. He did not mention the US $1 billion loan that Zimbabwe has requested from South Africa to help the country import fuel and food - and service its foreign debt, amid fears that it faces the chop from the IMF. The Central Bank also devalued the Zimbabwean dollar by almost 40 percent on Thursday, from around Zim $10,000 to $17,500 to the US dollar. Despite apparent hostile trends in the economy, Gono said inflation - currently at 163.4 percent - would start falling in September and be reduced to double-digit figures by the end of the year. Gono's monetary review statement has been met with mixed feelings. While industrialist Anthony Mandiwandza described it as a "commendable move in the right direction", the economic advisor to the opposition Movement for Democratic Change (MDC), Eddie Cross, thought otherwise. Although he welcomed the devaluation, Cross said he felt it fell far short of a realistic level for the Zim dollar. "It was long overdue, but I think the Reserve Bank should have devalued the currency to Zim $25,000 to one US dollar instead of the Zim $17,500," he commented. Both Robertson and Cross voiced concern that allowing fuel to be sold for hard currency would encourage the parallel money market. "The move will certainly boost supplies - and it's a commendable one to those with foreign exchange - but my fear is that it will fuel the black market, as people will surely buy the US dollar on the parallel market to buy the fuel if it is not available in other normal stations," Cross noted. Robertson said service stations might also be encouraged to sell fuel selectively to customers paying in the US currency.