Sunday, February 04, 2007

Zimbabwe's Troubles Continue

Zimbabwe Devaluation Ruled Out
Zimbabwe’s Farm Deadline Lapses

Gideon Gono, the governor of Zimbabwe’s Reserve Bank has ruled out a further devaluation of the country’s currency, despite spiraling inflation. (Devaluation is a reduction in the value of a country’s currency with respect to foreign monetary units.) There is a chronic shortage of foreign currency in Zimbabwe, but Mr. Gono believes no amount of devaluation would bring foreign currency into Zimbabwe unless fundamental issues were first addressed. Mr. Gono said that exchange rates would remain as they were despite significant distortions in the market.

The country is now in its eighth year of economic recession. Rising energy costs have driven the official annual inflation rate to 1,281%. Currently, the difference between the official dollar exchange rate and the black market rate is vast. One U.S. dollar is worth approximately 250 Zimbabwean dollars, but on the black market, the U.S. dollar can be sold for 5,000 Zimbabwean dollars.

Zimbabwe's economic crisis has led to high levels of unemployment, and a huge exodus of Zimbabweans to neighboring countries, particularly South Africa. Zimbabwe’s food production has also plummeted since land reforms saw the farms of white owners seized as part of a government program to redress economic balances left over from British colonial rule.

The last remaining 400 white farmers in Zimbabwe had until this past weekend to hand their property over to new black owners or face prosecution. Some farmers expect the government arrests to begin on Monday. The remaining farmers believe that arrest and prosecution is the only way of getting a hearing in court.

Questions: What is next for Zimbabwe? Should Zimbabwe's current President Mugabe remain in power?

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