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Thursday, 5 December, 2002, 15:34 GMT
Zimbabwe currency support drive 'fails'
Zimbabweans queuing for fuel
Zimbabweans have been facing fuel shortages since 1999
A Zimbabwean drive to support its currency by cracking down on black market trade is failing, a report has said.

The administration of President Robert Mugabe has closed down bureaux de change, and ordered exporters to exchange half of their foreign cash reserves into Zimbabwe dollars, in an effort to boost the ailing currency.

But while the Zimbabwe dollar rallied last week to an informal rate of 700 to US$1, from as low as Zim$1,600 to US$1, most of the gains have since been lost, Reuters news agency said.

One US dollar currently buys about Zim$1,200, Reuters said.

"What we saw last week was that momentary panic, but there is now another resurgence of the US dollar," a trader told the agency.

Worsening crisis

Zimbabwe has for three years suffered a shortage of foreign currency, hindering efforts to import food and fuel in the face of a worsening economic crisis.

According to the Financial Gazette newspaper, economic conditions have worsened such that half of Zimbabwe's industry could shut down for the first three months of next year to mull over survival strategies.

The government has set an official exchange rate of Zim$55 to US$1.

But with unofficial traders buying US dollars for 20 times the official rate, foreign currency has flowed onto the black market.

The government's latest curbs were introduced in an effort to seize control of foreign currency trading.

But economist Witness Chinyama told Reuters: "The problem is that the current government policies are not geared to improve the flow of foreign currency into the country.

"The parallel market will continue to thrive because that is where manufacturers are forced to source money for key imports."


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