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Forex taskforce no solution

Staff Writers

ECONOMIC analysts say the formation of a government taskforce in a bid to resolve foreign currency inflows to state coffers will not resolve the crisis. Government this wee

k set up a nine-member taskforce to address leakages and externalisation of funds by exporting companies.

Analysts have, however, said the taskforce made up of cabinet ministers is unlikely to resolve the crippling cash crisis that has seen Zimbabwe failing to import even the barest of essentials such as fuel and electricity.

They say the taskforce is likely to recommend further regulations that could worsen the already critical situation.

Analysts said such measures were likely to be detrimental to the recovery of the export sector, which is struggling with the grossly over-valued Zimbabwean dollar.

“They will achieve nothing from the taskforce except further repressive laws that will plunge the economy into difficulty. We need a realistic exchange rate that will encourage business exporters to use the official market,” said an analyst with the Confederation of Zimbabwe Industries (CZI).

Analysts said Zimbabwe did not need such a committee but instead needed to focus on trying to earn elusive hard currency.

The Reserve Bank of Zimbabwe (RBZ), which controls foreign currency inflows, has admitted that the country is not raising sufficient money to enable government to make timely payments to its major creditors.

“Government is now in a corner and the country cannot be run like this,” economist John Robertson said. “What is needed is concrete action to try and raise foreign currency and not committees looking into the issue.”

Robertson said the decision was a desperate attempt to cover up for government’s failure to monitor financial institutions that were offloading foreign currency on the parallel market.

“The decision to give individuals $824 instead of the $6 000 that is being charged on the parallel market has worsened the situation,” he said. “What is actually needed here is for government to devalue the Zimbabwe dollar because it is overvalued and is not doing anybody any good.”

Another economist said a further crackdown on exporters would continue to scare investors from Zimbabwe.

The country has already been rated among the worst destinations for investment.

“Government could achieve much by staying out of business,” the CZI official said. “What they are attempting could lead to more problems for business that is struggling with fuel shortages, inflation and high personnel turnover.”

NDH Holdings Ltd chairperson Elizabeth Chitiga said foreign exchange remained the single most important factor hobbling the performance of the economy.

She said because of government inefficiency and as a result of the scarcity of foreign exchange, operational costs for corporates had soared to unprecedented levels thereby squeezing profit margins.

She said aggregate demand in Zimbabwe’s economy had continued to contract and could persist with serious consequences all round.

“High operational costs and scarcity of foreign exchange have conspired to stunt economic growth,” she said.

Tourism has slipped from being a major foreign currency earner as tourist arrivals have shrunk drastically on the back of adverse publicity associated with the breakdown in the rule of law, a controversial land reform programme, and arrests of journalists and lawyers.

An RBZ official yesterday said the economy further slowed this year against the background of deteriorating external and domestic macro-economic conditions.

He said industrial production progressively weakened throughout 2002, reflecting, in the main, weak domestic and export demand, persistent foreign exchange shortages and poor industrial viability.

He said what was needed were methods of trying to solve these problems and not merely setting up committees to “look into things”.

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