By Tony Hawkins in Harare
Published: August 8 2003 5:00
The Zimbabwe government is under mounting
pressure to devalue the official exchange rate of the Zimbabwe dollar as the
parallel market rate has collapsed over the past two weeks from Z$2,750 to the
US dollar to Z$5,500.
The official exchange rate has
been held at Z$824 to the US unit since the end of February, when the government
devalued the currency by some 93 per cent. Last week, angry small-scale tobacco
growers forced the temporary closure of the tobacco auction floors in protest
against the official exchange rate, at which they are paid.
They say their production costs are in effect
double the revenue they earn at the current rate of exchange.
The growers abandoned their boycott following
official assurances that the exchange rate was under review. This suggests that
the authorities are preparing either to announce another substantial devaluation
or that the government will resurrect its export price support scheme for
exports such as tobacco and gold.
There is no single explanation for the sudden
weakening of the Zimbabwe dollar in the unofficial market, but the country has
been gripped by a spending frenzy as individuals and businesses respond to
rapidly worsening inflation outlook.
The year-on-year inflation number for July, due
out next week, is expected to reach 400 per cent: share prices on the Zimbabwe
Stock Exchange have risen some 90 per cent in the past two months as asset
inflation takes hold.