Zimbabwe Central Bank Chief Refuses To Devalue; Opposition Demands He Resign
Reserve Bank of Zimbabwe Governor Gideon Gono said the devaluation that many expected him to announce Wednesday was not the answer to t
Reserve Bank of Zimbabwe Governor Gideon Gono declared in his first monetary policy review of 2007 that he would not devalue the Zimbabwe dollar. The central bank chief said devaluation would serve no purpose unless it was accompanied by government policies to control inflation. Gono, who has devalued the Zimbabwe dollar eight times since 2003, ruled out further devaluation of the local money. He stated that, “No amount of devaluation will lead to truckloads or plane loads of foreign currency coming into Zimbabwe.'' The official exchange rate against the U.S. dollar is Z$250, but parallel market traders have bid the price of the greenback up to more than Z$5,000. Many scarce items such as fuel are only available for hard currency, driving demand for foreign exchange. Gono called on the government to stop subsidizing food and fuel as public spending is fueling inflation. Unless fiscal policy is tightened,“the inflation dragon will swallow our economy," he warned. Twelve-month inflation exceeded 1,200% this month. The central bank chief also called on politicians to work together to spark an economic turnaround, acknowledging that there were “latent political tensions inasmuch as there are economic and social tensions” arising from the economic crisis. Gono also urged Harare to privatize money-losing state firms. He said selling off state-owned companies remains a “viable route through which government can unlock immense value, both in local and foreign exchange terms.” He pointed to Air Zimbabwe as a prime candidate for privatization, along with the Zimbabwe Iron and Steel Company, lately a source of scandal as well as financial losses. Though ailing state firms have been bleeding state coffers for years, President Robert Mugabe has refused to privatize what he considers strategic assets. Responding to Gono’s remarks, Zimbabwe National Chamber of Commerce President Marah Hativagone called on Harare to mend ties with the International Monetary Fund and other institutions to bring foreign investment into the country. She said there could be no economic turnaround unless foreign direct investment flows resumed. Hativagone said Gono's announcement that money transfer agencies would now be allowed to pay out hard currency was a welcome development which she hoped would channel more foreign exchange from the diaspora. Remittances from Zimbabweans living outside the country have been diverted into parallel channels because the official channels would only render local currency to remittance recipients. Secretary General Tendai