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Wednesday, 2 August, 2000, 10:54 GMT 11:54 UK
Zimbabwe devalues currency
War veterans occupy farm
Farm invaders have ruined crops, hurting export revenues
Zimbabwe has devalued its currency in an attempt to jump-start its ailing economy.

Finance Minister Simba Makoni said the government has decided to set the official exchange rate at 50 Zimbabwean dollars to the US dollar from 38 Zimbabwean dollars previously.

The currency had been trading at about 60 Zimbabwean dollars on the black market.


The move is part of a package of short-term stabilisation measures we hope will put the economy on track

Simba Makoni, Finance Minister

Mr Makoni said the move was needed to stabilise the economy and to prevent "a massive free fall" in the currency.

Inflation is already running at 70%, and a deepening currency crisis would only serve to stoke prices further.

The overvalued currency means prices paid to exporters are low, hitting key industries such as tobacco and gold mining.

Fuel shortages

It has also caused fuel shortages, which has made farmers wary of planting crops when they might not have enough fuel to harvest their produce.

"The move is part of a package of short-term stabilisation measures we hope will put the economy on track," Mr Makoni said.

Zimbabwe is in the midst of its worst economic crisis since the coming of majority rule in 1980.

Many analysts blame the current problems on a combination of mismanagement and corruption on the part of President Robert Mugabe's government.

The country went from Marxism to an IMF-sponsored structural adjustment programme at the start of the 1990s, to a situation in recent years which analysts say is bereft of any kind of sound economic policy at all.

In the run-up to parliamentary elections in June, Mr Mugabe made land redistribution a major plank of his campaign - a policy which led to invasions of white-owned farms and widespread violence in the country.

Farm invasions

The farms at the centre of the dispute over land reform provide the nation's economic backbone - agriculture is said to make up 20% of gross domestic product, and tobacco, a key hard currency earner accounts for about 30% of exports.

And the farm invasions have ruined many crops, which is a further setback for Zimbabwe's collapsing economy as the country can not afford to lose crucial revenue from agriculture.

The country's budget deficit is expected to reach some $45bn at the end of this year, about 15% of GDP.

To add to the misery, Zimbabwe has also been hit by HIV and Aids, affecting about a quarter of the adult population and reducing the country's workforce.

The country has also been involved in a costly war in the Congo, and chronic corruption is believed to be lining the pockets of Zimbabwe's political elite, while the country is getting sicker and sicker.

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02 Aug 00 | Africa
Zimbabwe grinds to a halt
19 Apr 00 | Business
Zimbabwe's economy under threat
04 Apr 00 | Africa
Zimbabwe's economic woes
14 Apr 00 | Africa
Who owns the land?
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