Zimbabwe devalues currency by 45%

The devalued Zimbabwe dollar remains below black market rates

Zimbabwe has devalued its currency by 45% in an attempt to raise foreign exchange for food imports.

The country's central bank said one US dollar would now be worth 9,000 Zimbabwe dollars, from 6,200 before.

The widely-expected adjustment remains some way below black market rates, which can command up to 18,000 Zimbabwe dollars per US dollar.

Drought has left the country in need of more than 1.2 million tonnes of food imports, at a cost of up to US$250m.

Economic policies, like the large-scale seizing of white-owned farms, have also contributed to a slump in domestic food production.

However, the central bank's currency auctions have failed to meet demands from importers for foreign exchange.

Soaring inflation

"Devaluation is not the only panacea. Exchange rate management must be carried out in a measured and balanced manner," said central bank governor Gideon Gono, in a televised address.

Zimbabwe's central bank also cut its economic growth forecasts for the current year to 2% to 2.5%, from 3% to 5% previously.

The government in Harare has declared inflation as one of the main economic threats facing the country.

Inflation jumped by an annual rate of 129.1% in April, up slightly from March's figure, but below January 2004's peak of 623%.

The central bank's inflation target for 2005 was raised to between 50% and 60%, from 20% to 35%.

Zimbabwe's economy has been reeling from six years of recession caused, critics say, by the land reform policies of President Robert Mugabe.

But Mr Mugabe, whose Zanu-PF party won a majority of seats in Parliamentary elections in March, says Zimbabwe's economy is being sabotaged by opponents of his policy of seizing white-owned farms for the country's landless black majority.