Devaluation rejected by Mugabe

Zimbabwe's Finance Minister Simba Makoni's campaign to have the country's currency devalued to a realistic market rate came under fire in the new session of parliament this week.

It had been pegged at Zim $55 to US $1 since October 2000, with shortages forcing importers to buy foreign currency on the parallel market at up to Zim $700 for the greenback.

President Robert Mugabe called devaluation sinister, saying it was advocated by "saboteurs" and enemies of the government.

Economist John Robertson said: "Devaluation is no longer an option, we have to do it."

He explained that inflation had trebled, increasing the cost of consumer goods, but the exchange rate remained constant, leaving exporters to survive on a third of their income.

However, he said players in a lucrative "round-tripping" market, where speculators buy at the official rate and make a profit by selling on the parallel rate, would have a lot to lose through devaluation.

"They are not keen to change it because it makes money for them," he said.

The country's budget is due in October but Robertson said: "They will be forced to do it by then - it won't be a choice, it will be a necessity. People are going out of business."