Zimbabwean Finance Minister Samuel Mumbengegwi announced a 99% devaluation of the country's dollar Thursday during a report to parliament on the country's fiscal policy, left in tatters by hyperinflation that ran at an annual 7,634% in July.
Mumbengegwi announced the devaluation of the Zimbabwean dollar to a rate against the U.S. dollar of Z$30,000 from Z$250 where it had stood more than a year.
He added that Harare was abolishing its two-tier exchange rate system which offered government agencies and exporting firms more advantageous rates.
“The Reserve Bank of Zimbabwe will, therefore, adjust the exchange rate applicable to all purchases and sales of foreign exchange in the market from $Z250 per U.S. dollar to Z$30,000 per US dollar with immediate effect,” Mumbengegwi declared.
He is the brother of Zimbabwean Foreign Minister Simbarashe Mumbengegwi.
Business leaders said the devaluation would help exporting firms – but added that the huge gap between the official rate and the parallel market rate now around Z$240,000 to the US dollar, eight times the new official rate, should be closed.
Correspondent Thomas Chiripasi reported from August House that the minister also announced that a worker earning Z$4 million a month would no longer be taxed, as compared with the lower tax-free threshold Z$1.5 million previously in place.
Zimbabwe Congress of Trade Unions Secretary General Wellington Chibebe said the tax-threshold increase was not enough, adding that workers are grossly underpaid.
Economist and consultant Luxon Zembe, a former president of the Zimbabwe National Chamber of Commerce, told reporter Blessing Zulu of VOA's Studio 7 for Zimbabwe that Mumbengegwi presented no measures to stimulate economic growth.
The minister told parliament that the government would need just over Z$37 trillion to keep the country running until the end of the year. Of this, Z$735 billion is allocated to presidential and parliamentary elections in March 2008 and Z$500 billion is going to improve airports in Harare and Victoria Falls looking to the 2010 World Cup - a surge of visitors is expected on the back of the soccer championship in South Africa.
Mumbengegwi told parliament Zimbabwe was losing at least US$50 million a month due to the clandestine exportation of gems and precious metals from the country.
Addressing critical water shortages in the cities, he allocated Z$1.4 trillion to restore the flow of water in Harare, Bulawayo, Marondera and Beitbridge. Mumbembegwi said Harare would also provide funds to help farmers in the coming planting season.
He told the house that a task force established to stabilize prices and incomes would be expanded nationwide to deal with “serious profiteering" by businesses. He said the panel was allocated Z$36 billion dollars to fund the continuation of its operations.