Zimbabwe dollar slips to new low
Wednesday, 01 Oct 2008 16:34
Zimbabwe's frail currency plunges to record lows as deadlock over allocation of key ministries persists
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Zimbabwe's frail currency plunged to record lows on Wednesday, a day after Robert Mugabe and Morgan Tsvangirai failed to break a deadlock over the allocation of ministries.
The Zimbabwe dollar depreciated by over 50 per cent as the political stalemate took its toll on the comatose economy, driving the cost of basic goods and services beyond reach of inflation weary Zimbabweans.
Traders on Wednesday were quoting the Zimbabwe dollar at between Z$700,000 to Z$800,000 against the US dollar under the bank transfer rate from Tuesday of Z$500,000.
On the streets, $1 was trading at Z$3,000, up from Tuesday's figure of Z$2,000.
Analysts said the weakening of the local dollar is driven by inflation expectations, speculation and uncertainty over the power-sharing deal that is teetering on the brink of collapse because of a stalemate over the sharing of cabinet portfolios.
"The weakening of the currency will continue to be driven by speculation and uncertainty since the market continues to wander in the wilderness in the absence of a government to formulate economic policies to reign in inflation," said John Robertson, an economic analyst.
A stalemate between president Mr Mugabe and prime minister designate Mr Tsvangirai over the allocation of cabinet portfolios has been referred back to former South
African President Thabo Mbeki, the mediator of the power-sharing deal.
The deal, signed by Mr Mugabe, Mr Tsvangirai and Arthur Mutambara, a faction leader of the opposition Movement for Democratic Change (MDC) party, is seen as the first real step in ending a decade long economic and political crisis of the Southern African country.
Zimbabwe battles a decade long economic recession of unprecedented proportions outside a war situation.
The crisis is characterised by high inflation that is running at over 11 million per cent, grinding poverty because of shortages of cash, food, basic goods, electricity among other basic necessities and high unemployment.
Critics blame Mr Mugabe, in power since 1980, for running down the once breadbasket of Africa with ruinous policies, a charge the 84–year-old leader denies.