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Zimbabwe's Top Banker Announces New Measures to Fight Inflation - 2003-12-18

The new governor of Zimbabwe's central bank, Gideon Gono, has outlined the country's monetary policy for the next five years, cautioning it will not lead to an immediate improvement for ordinary Zimbabweans.

The head of the central bank said some of the distortions in Zimbabwe's economy, such as dual exchange and interest rates, would remain at least for a year.

To deal with the chronic foreign currency shortage, the governor said the bank will set up an independent foreign currency auction where 25 percent of foreign currency earned through exports would be sold. This will inevitably lead to further devaluation of the Zimbabwean dollar.

The central banker also announced a series of measures to discourage parallel, or unofficial, trading in foreign currency.

To raise dwindling foreign currency, Mr. Gono said companies that earn foreign currency will be required to pay some of their bills, such as electricity, in foreign currency.

The governor also announced tighter controls on bank lending to discourage poor lending practices.

Inflation in Zimbabwe is expected to soar to an unprecedented 700 percent early next year. The governor said, if his plan, which he calls "the road map," is followed, inflation could drop to below 200 percent by the end of next year.

The central banker took a more conciliatory position on Zimbabwe's membership in the World Bank and the International Monetary Fund than President Robert Mugabe, promising to honor all the country's financial obligations.

Mr. Mugabe had said Zimbabwe can do without the financial institutions and, earlier this month, the IMF began a process to expel the country for defaulting on its obligations.