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Zimbabwe's New Economic Regulations Lead Businesses to Bankruptcy - 2002-11-22

Businesses leaders in Zimbabwe say new foreign currency regulations are crippling the export-oriented manufacturing sector. Many exporters say they are headed for bankruptcy or will be forced to shut down because of the regulations.

The new foreign currency regulations were introduced last week and businesses are already feeling the impact.

A few of the smaller manufacturers in Zimbabwe are already negotiating to close up shop because they say they have been bankrupted by the new regulations.

Others say they are completing their Christmas orders, and do not know if they will reopen after the Christmas break.

Still others say the government must have made a mistake and will correct the new measures.

The new regulations severely curtail exporters access to foreign currency, a precious commodity in Zimbabwe because of the country's soaring inflation.

Until now, exporters could place a percentage of their foreign currency earnings into their own bank accounts. Then, when they needed it, they could use their foreign currency to import raw materials or spare parts.

Under the new regulations, the government has virtual control of all the foreign currency the exporters earn.

They now have to exchange 50 percent of it at the official exchange rate, which is $55 (Zimbabwe) to $1 (U.S). On the street, it takes $1,800 (Zimbabwe) to get a U.S. dollar.

When the exporters want access to their foreign currency they have not exchanged, they have to apply to the reserve bank and justify why it is needed.

Several leading exporters say they applied for their own foreign currency early this week, but by Friday had still not been given permission to use it.

Several mining companies say they are in the same position, and economists are predicting marginal mines will be forced to close down early next year.

Bankers in Harare say they do not know what to do about the confusion over foreign currency accounts. One banker said Friday that he was advising his clients to hold on for another week and hope that the government cancels its new regulations.