Wednesday, January 9, 2008

Zimbabwe dollar - in free fall - stronger against USD

Z$1 triillion for house in Zim Dec 11 2007 08:25 PM

Just skim the article for the sense of it, then
space down to the italicized lines and let it
soak in for a minute...

Harare - A trillion dollar house, billion dollar bed and a million dollar beer. That and a severe cash squeeze are the latest sign of runaway inflation that has vexed consumers in President Robert Mugabe's Zimbabwe.

A newspaper advertisement shows a four-bedroom house with a pool and tennis court in Harare's leafy Glen Lorne suburb selling for just under Z$1 trillion, a whopping $33m at the official bank rate but only $667 000 on a widely used black market.

An identical property cost half the price a month ago.

Prices of household furniture, groceries and food and rentals have more than doubled in the past month as businesses seek to eke out a profit and remain afloat, but at a cost to consumers ravaged by the world's fastest rising prices.

Shops which were emptied of basic goods after Mugabe announced a blanket price freeze to tame inflation in June, have started restocking but prices have skyrocketed.

"Prices are increasing but my salary is not and that is a very big problem because it's now difficult to settle my bills," Humphrey Chitovhoro, a trainee with a Harare accounting firm said, a line now recounted many times by Zimbabweans.

Salaries are failing to keep pace with galloping inflation - the world's highest at nearly 8 000% - which has inflamed tensions in a country with rising unemployment and enduring foreign currency, fuel and food shortages.

Mugabe's government has so far failed to rein in an economic slide, which critics say has been badly hit by the veteran leader's policies, including the seizure of white-owned farms to resettle blacks that has knocked agriculture output.

Cash crunch

On Tuesday Zimbabweans jammed banking halls, desperately seeking cash, in short supply, the latest sign of the southern African country's economic free-fall.

Reserve Bank governor Gideon Gono said last month the launch of a new currency was imminent. This has not happened, instead cash shortages have worsened, with banks running out of notes.

Gono accuses foreign currency black market dealers of stashing more than half the total money in circulation and says the bank will not intervene in the cash crisis.

"I came here at five (03:00 GMT) and just got Z$5m. What can I do with that money," an angry mother of two who identified herself only as Auxilia said as she left a bank where a long queue stretched for a couple of blocks.

The amount is equivalent to three days of bus fare.

Most Zimbabweans use cash for their transactions since most basic goods like cooking oil, sugar and maize meal are purchased on the black market.

In a small vote of confidence for Gono, the Zimbabwe dollar has strengthened against the US dollar on the black market, rising to Z$1.5m per dollar on Tuesday from a low of Z$2.4m.

But businesses are feeling the cash squeeze as sales have dropped, while workers spend more time in bank queues.

"We need to have more money in circulation but we cannot expect the central bank to continue pumping in more money if that which is in circulation can not be accounted for. We are caught up in a vicious cycle," Joseph Malaba, a local industrialist told the official Herald newspaper.


A little comment from the Ol' Gnome:

If I'm analyzing this article correctly,

we have a country (Zimbabwe) which

has a currency losing value at the rate

of 8000% or more... But, its miserable

currency has gained value against the

United States Dollar. Does that give

us increasing confidence in the old


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