Government devalues Zim dollar

Zimbabwe's struggling economy has received a long awaited breather with the news that the government has devalued the currency for exporters to enable them to convert half their currency at a more competitive official exchange rate. Under the "National Economic Revival Programme", brokered between government, business and labour, exporters will be able to exchange their foreign currency at ZD $800 to US $1. The previous rate was ZD $55 to US $1 which was set by the government in October 2000 in an effort to halt the currency's freefall. The plan was announced by Finance Minister Herbert Murerwa on Wednesday afer a meeting of the Tripartite Negotiating Forum involving the Ministry of Finance, the Confederation of Zimbabwe Industries (CZI), the Employers' Confederation of Zimbabwe and the Zimbabwe Congress of Trade Unions. An initial "economic rescue plan" by the forum recommended interest rate and tax incentives for farmers and exporters and changes to foreign currency and fuel price regulations. According to the latest "export incentive", exporters must still surrender half their currency to the Reserve Bank at the official rate, but the other half may be converted at the increased rate to enable exporters to meet local expenses. Murerwa's announcement comes as the country struggles to halt an economic and humanitarian crisis reflected in acute foreign exchange shortages, an inflation rate that reached 208 percent in January and a food deficit affecting seven million people out of a population of 13.7 million. Recent measures to save the economy and to protect inflation battered Zimbabweans have included wage and price freezes on commodities. But a thriving black market has taken advantage of the shortages and producers are reluctant to sell at prices that do not cover their costs. Welcoming the news of the devaluation, Zimbabwe Chamber of Mines chief executive David Murangari said the move would help as it was more in line with inflation. Zimbabwe's mining industry, which accounts for 30 percent of the country's foreign exchange, contributes four percent of GDP and employs about 45,000 people, already had a slight edge with an increased exchange rate of ZD $150. The tobacco industry also received a US $158 rate. "It is a good thing and the Chamber of Mines is generally satisfied," Murangari told IRIN. "It will address the immediate problems that businesses are facing and should help to boost the performance of the productive sector." He added that it would also enable companies to afford repairs to equipment and buy machinery. Economist John Robertson told IRIN: "It has given a respite to some people and companies are working out how they can live with it."