Zim dollar hits a million to the pound as Murerwa unveils 'scandalous' supplementary budget

By Violet Gonda

27 July 2006

More doom and gloom for Zimbabweans as money transfer agencies announced the Zimbabwe dollar reached the 7digit mark, on the parallel market. Several companies involved in exchanging money confirmed that the Zimbabwean dollar hit the ZW$1 000 000 mark to the pound sterling, Thursday, putting a huge burden on Zimbabweans both at home and in the Diaspora.

Reactingto the news Tendai Mudzingwa, one of many Zimbabweans based in London said; “ I found the whole thing really frightening. I have been getting text messages from currency dealers for the past 5 days and the numbers increased over the last days. I just knew it was a matter of time before it reached the million dollar mark.”

She added, “For me it really is frightening. It scares me to think how my family and friends are going to be living in Zimbabwe and how I will afford to be able to keep sending them money.”

In a week the dollar went from ZW$900 000 to a million against the pound.

The Zimbabwean dollar hitting the landmark million dollar rate comes at a critical time when many are anxiously waiting to hear what Gideon Gono, the Reserve Bank of Zimbabwe (RBZ) governor is going to say in his Monetary Review Policy.

Economists say the effects of this are more price increases and a rise in inflation. John Robertson said; “This is very scary because it shows that the price of every imported product is going to be rising steeply.”

The economist noted that there has not been much of a change in the steady progression of these figures saying: “We saw it going to more than ZW$500 000 to the US$. So it’s now getting about ZW$550 000 to US$1 and that’s what makes it equal to more than ZW$1m to a pound.”

There is a thriving black market industry in the country and most companies including those registered with the RBZ are reportedly trading on the parallel market.

Robertson said the official exchange rate which still stands at ZW$100 000 to the US$ - a fifth of the market value, needs to be reviewed. “Until it’s corrected many people who export products would rather sell their export proceeds on the parallel exchange market instead of on the official exchange market where the government can get their hands on it.”  Analysts say because of the economic crisis, manufacturers have no choice as they risk going bankrupt if they trade on the official market.

According to Robertson, to get it right proper policies will have to be implemented. The economist said the scarcity of foreign currency is a result of the loss of principal export industries; the attack on property rights has also resulted in the loss of investments. Zimbabwe has had so many failures in meeting repayment terms in the past which has resulted in the loss of credit rating. All these combined have contributed to a serious shortage of forex which in turn causes price increases

Meanwhile, Finance Minister Herbert Murerwa unveiled a ZW$327,2 trillion supplementary budget on Thursday. It is almost three times more than last year’s budget of ZW$129 trillion. Murerwa presented the supplementary budget before parliament on Thursday.He also raised the zero tax threshold from $7 million to $20 million, while reducing tax to 35% for people earning above $54 million.

Independent Tsholotsho MP Professor Jonathan Moyo told the website Newzimbabwe.com the supplementary budget was "scandalous" and "proof that the government has totally lost control".

Moyo said: "This cannot be a supplementary budget. How does a $327 trillion budget supplement a $129 trillion budget? This is the clearest evidence that the country's economy is in complete meltdown and free fall.