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Zimbabwe Devalues Currency by a Record 1,200 Percent


Zimbabwe devalued its currency Thursday as part of its battle to tackle a deepening economic crisis. However, economists say it was too little too late and will do nothing to slow inflation. Peta Thornycroft reports for VOA that the devaluation makes no difference to every day trading as the black market value of the Zimbabwe dollar is the mostly widely used measure.

Zimbabwe officially devalued its near-worthless currency again, moving to a rate of 30,000 Zimbabwe dollars to one American dollar, from the old rate of 250 per American dollar.

Technically, the devaluation erases a system of multiple exchange rates set for exporters, government officials and sellers of foreign currency that had been devised to shore up the government's dwindling foreign exchange reserves.

But in practice, the devaluation meant little, as the beleaguered Zimbabwean dollar already trades on the black market at a rate approaching 250,000 for one American dollar.

Economists have long said that Zimbabwe should let the value of the Zimbabwe dollar float in the market which would do away with the black market which is where most money changing takes place.

Economists from private sector banks also say the devaluation, the largest in Zimbabwe's history at 1,200, will make no difference.

Economist John Robertson told journalists in Harare this week that this devaluation would not reduce inflation, which stands at more than 7,000 percent.

Zimbabwe's inflation and chronic shortages of foreign currency have depleted a once robust tourism industry and crippled the nation's industrial sector.

Another economist who asked not to be named said soon local currency would not be worth anything at all. He said dollarization, as he called it, when foreign cash replaces worthless Zimbabwe dollars, was the next step along the road of Zimbabwe's financial ruin.

In June, businesses were forced to freeze prices as President Robert Mugabe's government tried to stem inflation.

But some producers, fearing making a loss, cut production, meaning the move exacerbated shortages, leaving shop shelves empty.

The southern African country's economy has shrunk in real terms since 1999 when international donors stopped funding Mugabe's government over policy differences, including his seizure of white-owned farms for blacks.