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Zimbabwe's Central Bank Attempts Clean-up Of Financial Sector - 2004-01-13

Zimbabwe's central bank has completed its first auctions of foreign currency, in a new drive to clean up the financial sector and bring the black market to an end. Interest in foreign currency at the auction was slim.

The Zimbabwe central bank traded foreign currency during its first auction at four-thousand-196 Zimbabwe dollars to one U-S dollar, sharply down from six-thousand the U-S greenback fetched in December.

Commercial bankers who asked not to be named, said that less than five-million U-S dollars were traded at the auction. The next auction will be held on Thursday.

Major exporters, including some medium to large gold mines, have said they stayed away from the auction, saying the rates offered for the U-S dollar were unsustainably low.

They said wages and other business costs have risen dramatically over the previous year and, unless they can get between six-and eight-thousand Zimbabwe dollars for one greenback, they will not be able to stay in business.

Under the complex currency exchange rules, exporters must exchange one-quarter of their foreign earnings at the official rate of 824 Zimbabwe dollars for one U-S dollar. They then have to exchange another quarter of their earnings at rates offered at the Central Bank auctions. They can keep the remaining half of their export earnings in foreign currency for a limited period.

An executive of a large manufacturer, who asked not to be named, said this exchange system will never last. He said, his company must be allowed to exchange its foreign earnings at decent rates or it will be forced out of business. He said he expects the exchange rate at the auctions to rise to about 12-thousand Zimbabwe dollars to one greenback.

Bankers and economist who spoke to V-O-A gave the Central Bank's new governor, Gideon Gono, high marks for his effort to bring order to Zimbabwe's messy finances. But they said the unofficial currency market is more efficient than the central bank auctions and reflected Zimbabwe's depressed economy.