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Inflation hits aid agencies' capacity to assist
February 22, 2007

JOHANNESBURG - Hyperinflation and an unrealistic foreign exchange rate has posed tremendous challenges for humanitarian organisations in Zimbabwe struggling to provide aid and development assistance. 

"We fund the number of programmes that we can at the current inflation and exchange rate, but it is very difficult, we have to continuously watch our actual budgets so that we do not exceed available funding," said an aid worker with an international development agency who asked not to be named.

The official exchange rate is pegged at Zim$250 to the US dollar, but on the parallel market - on which real prices are based - it is Zim$6,000 for a greenback. Some nongovernmental organisations (NGOs) have negotiated preferential exchange rates with their banks to stretch their limited foreign currency.

"But not everyone is that fortunate, not all the NGOs have the financial muscle to negotiate deals with the banks", pointed out an aid worker. "Particularly the local NGOs, who are small: they not only have to deal with the unrealistic foreign exchange but also the high inflation which keeps pushing costs up every month."

As a result even basic office equipment, like fax toner, can cost several thousand US dollars at the official exchange rate. "Everyone likes to keep their money dealings legitimate, so we are very reluctant to look for deals in the parallel market," commented an advocacy officer with a local rights NGO.

With inflation at around 1,600 percent, nearly 80 percent of Zimbabweans unemployed, and the minimum wage no where near the cost of a basket of basic household items, NGOs are under tremendous pressure to provide more humanitarian assistance.

The NGOs in Zimbabwe are caught "between a rock and a hard place", pointed out John Makumbe, a political analyst based in the capital, Harare.

"The NGOs are operating in a war-like situation with high inflation and an increased demand for services related to health, social care and education ... as the government structures have failed to provide for the shattered public," said Makumbe. "Yet the state prevents NGOs from reaching out to as many people as they can afford to as they have to use the official exchange rate and abide by other foreign exchange regulations, unlike in real war situations."

In addition the government views NGOs with a degree of caution, accusing some of being fronts for Western powers hostile to President Robert Mugabe and his ruling ZANU-PF party.

According to the United Nation's Children's Fund, Zimbabwe has the world's highest percentage of orphans - 1.6 million out of a population of about six million children. But an international development agency, trying to provide care and support to vulnerable children in the south of the country, has been forced to make difficult choices as a result of the economic crisis.

Hyperinflation has eroded the traditional role of extended families to take in orphans.
"In many areas, we are the only support system that people have, and it can get quite tenuous when we have to reduce the number of beneficiaries or the portion of aid they receive," pointed out an operations manager with the agency.

"The bottom line is you have to become very flexible, be prepared and ready to keep changing your targets and revising your programmes," commented another aid worker.

Zimbabwe's economy has been in recession since 2000, when the government embarked on a fast-track land redistribution exercise that sought to give land to thousands of people from impoverished communal areas by removing more than 4,000 white commercial farmers from their estates.

The land reform programme disrupted agricultural production, the country's main foreign exchange earner. The government, however, blames the economic crisis on a series of droughts, and "sanctions" imposed by the European Union and United States in protest over elections they deemed unfair.

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