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Last Updated: Thursday, 6 September 2007, 21:53 GMT 22:53 UK
Zimbabwe in currency devaluation
A Zimbabwean holds up a new 200,000 dollar note (2 August 2007)
Zimbabwe has had to print new large-denomination notes to cope
Zimbabwe has devalued its currency as part of its battle to tackle its deepening economic crisis.

One US dollar now buys 30,000 Zimbabwe dollars on the official market, having previously earned 250 Zimbabwe dollars.

However dealers said that on the illegal market, $1 was buying 250,000 of the Zimbabwean currency

Latest figures put Zimbabwe's annual inflation at 7,634%. The International Monetary Fund (IMF) has warned it could reach 100,000% by the end of the year.

Finance minister Samuel Mumbengegwi unveiled the devaluation in a budget announcement.

Other reforms included waiving taxes on some lower earners and increasing stamp and excise duties.

The devaluation announcement was described as a "move in the right direction" by former head of the National Chamber of Commerce, Luxon Zembe.

However he said that the gap between the official rate and the market rate needed to be narrowed.

Empty shelves

Zimbabwe's economic crisis has led to an estimated three million people fleeing the country for South Africa.

Unemployment stands at about 80% and there are mass shortages of fuel and foodstuffs.

Businesses were forced to freeze prices in June as President Robert Mugabe's government tried to stem inflation.

But some producers, fearing making a loss, cut production, meaning the move exacerbated shortages, leaving shop shelves empty.

Last month a new 200,000 Zimbabwe dollar note was launched, in a bid to tackle the country's inflation, the highest in the world.

The country's government has created a commission to find a way to control soaring living costs.

But correspondents say that as long as Zimbabwe has a shortage of staple foods, including maize, food shortages are likely to continue.

Critics have blamed President Mugabe's policies, especially the seizure of farms, for ordinary Zimbabweans' hardship.

For his part, President Mugabe has accused foreign governments of trying to interfere in Zimbabwe's affairs - saying some businesses had raised prices without justification as part of a Western plot to oust him.

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