Zimbabwe Currency Falls to Record Low

HARARE, Zimbabwe, March 5, 2008 — -- The Zimbabwe currency tumbled to a record low of 25 million for a single U.S. dollar Wednesday, currency dealers said.

With Zimbabwe dollars mostly available in bundles of 100,000 and 200,000 notes, one $100 note bought nearly 40 pounds of local notes at the new market rate Wednesday.

Currency dealers said uncertainties ahead of elections scheduled March 29 and the world's highest inflation rate of 100,500 percent annually led holders of hard currency to hang on to their money while the central bank pumped more local cash into the market for election costs.

The exchange rate was also pushed up by central bank buying on the unofficial market to pay for power, gasoline and vehicle imports ahead of the vote, said one black market dealer who asked not to be identified for fear of reprisals.

Analysts trace Zimbabwe's economic collapse to a government decision in 2000 to transfer land from whites to blacks, which resulted in often violent seizures of farms and disrupted the agricultural-based economy. The government, though, blames Western powers it says are hostile.

The black market exchange rate for the U.S. dollar broke the 1 million Zimbabwe dollar mark for the first time in late October.

The value of the Zimbabwe dollar weakened steadily against hard currencies throughout last year but its fall quickened dramatically in recent weeks, the dealer said.

With industry and production collapsing, Zimbabweans have become heavily dependent on imports of the corn meal staple and basic goods. Until last year, the former regional breadbasket was self-sufficient in canned and processed foods, household goods, soap, toothpaste, toiletries and other items now imported from neighbors Malawi, South Africa and Zambia and from as far afield as Egypt,Germany, Iran and Malaysia.

According to latest official poverty line data, an average family of five needs a monthly income $35 to survive while remaining living in poverty.

But most general hands and other lower paid workers earn less than the equivalent of $10 a month in an economy also suffering record formal sector unemployment of 80 percent.