Zimbabwe's currency this week sank to its lowest level in the country's history. At the present rate of exchange, it now costs nearly 1,000 Zimbabwe dollars for one U.S. dollar. Economists say the latest plunge by Zimbabwe's currency was sparked by the cost of imported fuel.
Three weeks of fuel shortages ended Monday, after the government used all its available foreign currency to pay Libya for fuel. The fuel was stored in tanks controlled by the Libyans on the outskirts of Harare, and they only released it after receiving payment in foreign currency.
Zimbabwe pays Libya about 40 American cents per liter of fuel. It is sold to the public and transporters at eight cents a liter. If the fuel were sold at what it actually costs the government, it would be about 400 Zimbabwe dollars a liter.
Several economists said the country would grind to a standstill if Zimbabweans had to pay the actual price for fuel. Motorists are already hard pressed to pay 70 Zimbabwe dollars a liter.
And fuel is not the only import that must be paid for in hard currency. Zimbabwe imports electricity from South Africa and Mozambique and must pay those countries in hard currency.
In years, the country earned much of its hard currency from its tobacco exports, and much of this currency was used to pay for importing fuel and electricity. But this source of hard currency is also disappearing, as most tobacco farmers have been evicted from their homes and land.
On Monday, the tobacco industry announced that its foreign earnings for the upcoming season would be down to less than a third of previous years.