HARARE – Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono has rejected devaluing the local dollar opting to repose greater faith in a social contract of labour, business, government and civic society to lift the country out of an unprecedented economic meltdown.
Economic analysts had speculated that the central bank chief, who presented his first monetary policy statement of the year in Harare yesterday, would use the occasion to announce a fresh devaluation of the Zimbabwe dollar from 250 to one American dollar to anything above 750 to the greenback. Speculation on the market had driven rates through the roof over the past few weeks with the unstable local currency losing 50 per cent of its value against the US unit on the parallel market.The bulk of foreign currency is traded on the illegal but thriving parallel market.Gono called for a return to a market economy saying market distortion through various interventions by the government had only served to enrich a few while impoverishing the majority.The RBZ governor, tasked by President Robert Mugabe to resuscitate the comatose economy, predicted annual inflation to drop to 65 per cent by December 2008 from the current 1 281,1 per cent.”No amount of devaluation will lead to foreign currency inflows in a sustainable manner,” Gono argued.Eight other bouts of devaluation since Gono took over at the RBZ in 2003, have failed to impact on rampant inflation, which Mugabe has labelled Zimbabwe’s enemy number one.Gono, who blamed price distortions as a major hurdle to economic progress, said recovery and the fight against inflation has “to rely on a spirit of partnership rather than controls, controls, rules and regulations”.”A social contract between labour, employers, government and civic society could yield disinflation but it needs bold action to be taken now.We need to act and act now,” Gono said.”Over the past seven years pricing distortions have been the driving force of inflation to the enrichment of a few,” Gono said.The central bank chief said Zimbabwe was losing between US$30 million and US$40 million every week through illegal activities of what he described as “smuggling barons” who would never be deterred by the light sentences they get when caught.Gono attributed rising inflation to price distortions, fuelled by the parallel market for basic goods and foreign currency – all short on the formal market.He also called on the government to privatise its loss-making parastatals and to cut subsidies to black farmers resettled on former white farms, saying both had become “parasites” feeding on the fiscus.He said: “It is time to stop the policy of appeasement in providing subsidies to parastatals and to farmers because these have been abused.”ZimOnlineSpeculation on the market had driven rates through the roof over the past few weeks with the unstable local currency losing 50 per cent of its value against the US unit on the parallel market.The bulk of foreign currency is traded on the illegal but thriving parallel market.Gono called for a return to a market economy saying market distortion through various interventions by the government had only served to enrich a few while impoverishing the majority.The RBZ governor, tasked by President Robert Mugabe to resuscitate the comatose economy, predicted annual inflation to drop to 65 per cent by December 2008 from the current 1 281,1 per cent.”No amount of devaluation will lead to foreign currency inflows in a sustainable manner,” Gono argued.Eight other bouts of devaluation since Gono took over at the RBZ in 2003, have failed to impact on rampant inflation, which Mugabe has labelled Zimbabwe’s enemy number one.Gono, who blamed price distortions as a major hurdle to economic progress, said recovery and the fight against inflation has “to rely on a spirit of partnership rather than controls, controls, rules and regulations”.”A social contract between labour, employers, government and civic society could yield disinflation but it needs bold action to be taken now.We need to act and act now,” Gono said.”Over the past seven years pricing distortions have been the driving force of inflation to the enrichment of a few,” Gono said.The central bank chief said Zimbabwe was losing between US$30 million and US$40 million every week through illegal activities of what he described as “smuggling barons” who would never be deterred by the light sentences they get when caught.Gono attributed rising inflation to price distortions, fuelled by the parallel market for basic goods and foreign currency – all short on the formal market.He also called on the government to privatise its loss-making parastatals and to cut subsidies to black farmers resettled on former white farms, saying both had become “parasites” feeding on the fiscus.He said: “It is time to stop the policy of appeasement in providing subsidies to parastatals and to farmers because these have been abused.”ZimOnline
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