Zimbabweans to pay for fuel in hard cash, Zimdollar devalued again

HARARE - Zimbabwe will beginning September sell fuel to motorists in hard currency in a desperate measure to end a six-year fuel shortage that worsened in recent months, almost bringing the crisis-hit country to a halt.

In a monetary policy statement on Thursday that fell far short on measures to revive the comatose economy, Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono also devalued the local dollar to $17 500 per one American unit.

Previously the Zimbabwe dollar officially traded at around $10 000 to one greenback although the illegal but thriving foreign currency black-market paid double that amount for a US$.

"With effect from 1 September the motoring public can access fuel at the designated service (filling) stations, which will be announced in due course by the Ministry of Energy and Power Development through payment in foreign exchange, at the initial price of US$1 per litre," Gono said.

The central bank chief did not clarify whether the same price will apply for both petrol and diesel. The last-ditch move is apparently hoped to assist garage owners to raise hard cash from the public to pay for fuel imports.

Rising international prices for oil have exacerbated Zimbabwe's fuel crisis, itself the result of acute foreign currency shortages that began when the International Monetary Fund (IMF) withdrew balance-of-payments support in 1999 after disagreeing with Harare over fiscal policy and other governance issues.

President Robert Mugabe's chaotic and often violent seizure of productive farmland from whites only helped worsen foreign currency shortages as the mainstay agricultural sector and particularly the tobacco sector, which is the biggest single export earner, were disrupted.

Zimbabwe, once a regional breadbasket, has since 2000 when Mugabe began his land seizure programme survived on food hand outs from international agencies after farm production fell by about 60 percent. Four million people or a quarter of the country's population require food aid this year.

Apart from fuel, electricity, essential medical drugs, machine spare parts for industry, other key commodities are also in critical short supply in Zimbabwe because there is no hard cash to pay foreign suppliers.

Gono announced that foreign embassies, externally funded non-governmental organisations, other international groups, Zimbabweans living abroad and other sellers of foreign currency would with immediate effect be paid at the rate of $17 500 to one American dollar.

The exchange rate at the government's foreign currency auction floors mostly used by industry and commerce remained at around $10 000 to one US$. But this rate normally tracks the exchange rate used for exiled Zimbabweans and economic analysts expect it to align with the new diaspora rate within days.

In a desperate plea to Zimbabweans who siphoned hard cash outside the country, Gono said such funds could be repatriated back on a "no questions asked basis." Holders of such funds could also import whatever goods into the country again without questions being asked, the central bank chief said.

He said: "In order to allow for the free inflows of free funds which, for one reason or another, found their way into offshore markets, the Reserve Bank is pleased to announce that the programme of Import Tracking Control Numbers has been suspended with immediate effect.

"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."

Harare has previously prosecuted people for externalising scarce hard cash. Former finance minister Chris Kuruneri is on trial for allegedly externalising millions of hard cash.

Gono admitted inflationary pressures were on the upsurge saying it would be difficult to tame the inflation beast, declared Zimbabwe's number one enemy by Mugabe. Inflation is pegged at 164.3 percent and is amongst the highest such rates in the world.

Zimbabwe earned US$877 million during the first six months of the year compared to US$771.5 realised over the same period last year.

Loan repayments to the IMF had improved to US$9 million every quarter up from US$1.5 million, the RBZ chief said. The Bretton Woods institution, whose board meets next month, is expected to expel Zimbabwe over outstanding debts of more than US$300 million.

Gono was silent on a US$1 billion loan Zimbabwe has requested from South Africa for fuel and food imports. - ZimOnline