Good tobacco crops can't compensate for Zim's currency woes - economist

THE DOLLAR in Zimbabwe has continued its downward course - albeit at a slower pace than the original crash - and can be expected to still have a serious braking effect on trade to that country, according to a bank economist.
Speaking about the sad days since Black Friday - the November 14 date when the currency collapsed by 40% in one day - he takes the fatalistic viewpoint that the Zim dollar is going to continue on the downhill path.
The economy is still very fragile, with the low gold price at the moment doing nothing to help it.
And, while FTW's economics source points to good tobacco crops and prices in the latest season, he also sees contrary factors. Increased prices because of the state of the dollar are still coming through, he said, and anything extra from the tobacco exports will be more than eaten up in this process.
The reactive policy of the government (under President Robert Mugabe) is also not doing anything to help the Zimbabwe economy to weather the storm.
No reversal of its land re-acquisition policy or its war veterans gratuities were forthcoming - despite opposition domestically by involved parties, and internationally by the aid donor community - and these two issues are seen as knocking big, undeserved holes in present and future budgets in the country.
And, with a need to get revenue to cover these moves, and to cover the plummeting dollar exchange, the government introduced a set of tax increases - everything from sales and fuels taxes to personal income tax, and with the staple food of maize more than doubling in price under the new tax regime..
Although the Zim dollar is currently sitting at around 16 to the US dollar, it has been as high as 18 in recent times - and higher, rather than lower, exchange rates are expected by the banks in coming months.
And the present international perception of Zimbabwe is that it is likely to face more trouble before things can get better. Said our source: This is pictured by the attitude of a lot of investors I have talked to recently. They have indicated that they are by-passing what they term The Black Hole of Zimbabwe for the time being.
It's a sad indictment of a country which could have so much going for it economically - if only it was better managed.