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Zimdollar: the zeros are coming back
The Southern African
May 31, 2007

http://thesouthernafrican.com/business/african_biz/zimdollar_the_zeros_are_coming_back_20070531_1460_83.html

LONDON - The Zimbabwe Dollar set a new milestone on Thursday with most parallel market dealers paying Z$105 000 for one British pound.

What is more startling is the fact that 3 zeroes were removed from the currency by the Central Bank last year and if these were added back, it's actually Z$105 million buying one pound.

These rates translate into skyrocketing prices for ordinary people as the cost of imported goods hits the roof. The rate of inflation for April peaked at 3,200 % and it is expected to top 4,000 for May.

Economic analyst Bekithemba Mhlanga told Newsreel the Reserve Bank is busy mopping up foreign currency from dealers to help pay for fuel and energy bills. This he says explains the plummeting value of the Zimbabwe dollar this month.

Despite government not acknowledging black market rates and sticking to the official exchange rates in their dealings they are secretly buying forex on the black market.

"There is nothing called a shortage of foreign currency, what is in short supply is a creative means of mopping it up," Mhlanga said, explaining how the government sources its forex.

Several banks and fuel dealers who are allowed to sell in foreign currency are at the centre of the collection system. A large population of Zimbabweans working or living in the Diaspora have also enabled Mugabe's regime to tap into the forex that they repatriate home.

Mhlanga said Zimbabwe's entire production base had collapsed and most companies were operating at below 10 percent capacity.

This has in turn led to an over reliance on imported goods, again increasing the demand for forex. He said the problems were made worse by the excessive printing of money, which has created an over-supply of Zimbabwe dollars that are not backed up by goods and services.

The hyper-inflationary environment has also meant people are buying forex just as a means of storing value and selling it later when they need to make purchases. This is because the local currency plummets in value everyday.

The country's economy is on its knees with experts blaming violent farm grabs for killing the agriculture sector, which was the mainstay of the economy. Corruption and mismanagement in government have added the final nail to the coffin lid - with SW Radio Africa.

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