The Dailies

The frenzy to buy hard currencies in Zimbabwe’s struggling economy pushed the exchange rate for the U.S. dollar as high as a million Zimbabwean dollars on the black market Thursday, dealers said.

The new rate, a halving of the Zimbabwe currency’s value in just 10 days, came as the government of this southern African country announced another surge in the inflation rate, already the highest in the world.

The state central statistical office said September’s inflation heated up to an annual rate of 7,982 percent — meaning an eightyfold jump in prices over a year. The official rate was 6,592 percent in August, but independent estimates put real inflation closer to 25,000 percent.

Demand for foreign currency is soaring as people scramble to acquire cash that they can use in neighboring nations to buy cooking oil, soap and other basic goods that are increasingly hard to find in Zimbabwe.

Currency dealers said the central bank has added to the pressure by also buying on the black market, because the government needs hard currencies to pay for imports of food, electricity and gasoline.

The result is a big jump in the U.S. dollar’s exchange rate against the Zimbabwe dollar.

“People are asking for a million and getting it in big bank-to-bank transfers,” one dealer said. “Cash for cash is anything above 750,000 to one.”

Just a few days ago, in the first week of October, 520,000 Zimbabwe dollars were needed to buy $1 on the black market. The rate was 400,000 for one in mid-September.

“There’s too little foreign exchange out there and too many chasing it,” said the dealer, who spoke on condition of anonymity for fear of being punished by the government since black market trading is illegal.

But the government appears to be ignoring the illegality. Zimbabweans returning from shopping trips across the border say they were met by central bank buyers at Harare’s bus terminal offering top black market rates for any cash from the U.S., Botswana and South Africa.

Police raids on currency dealers at the terminal have stopped.

Central bank governor Gideon Gono said in a policy speech this month that the bank viewed the bus terminal as a source of hard currency. He added that the government’s official exchange rate of 30,000 Zimbabwe dollars for $1 was obsolete.

The country’s biggest single source of hard currency is the money sent home by the estimated 4 million Zimbabweans — one-third of the population — who live and work abroad because of the economic slide.

Zimbabwe had one of Africa’s strongest economies before the government’s seizure of white-owned farms wrecked the agriculture sector. The result has been severe shortages of food in a nation that was once the region’s breadbasket and Africa’s second-largest exporter after South Africa.

*Source

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