Rand to shore up Zimbabwe dollar?

A plan to rescue Zimbabwe's collapsing economy by pegging the Zimbabwe dollar to the South African rand is being put together by the Southern African Development Community (SADC), South Africa's Sunday Independent newspaper reported.

Pretoria, Harare - The plan, according to the paper, would involve extending the multilateral monetary area (MMA) of South Africa, Namibia, Lesotho and Swaziland to Zimbabwe.

The rand is legal tender in MMA countries and local currencies are pegged to it, stabilising their exchange rate with the dollar and other major currencies.

Record inflation, officially put at 4 500% but thought to be up to twice as high, has rendered the Zimbabwe dollar, and Zimbabweans' salaries, virtually worthless. On the black market the dollar trades for about Z$250 000.

SADC's Zimbabwe rescue package would see the reserve banks of South Africa and Botswana pump money into the reserve bank in Harare. In return, autocratic President Robert Mugabe would be obliged to agree to fundamental political reforms, the Independent reported.

Representatives from Mugabe's ruling Zanu PF and the opposition Movement for Democratic Change (MDC) are due to start negotiations on reforms under South African mediation near Pretoria this week, according to the paper.

Mugabe's government last week sought to curb galloping inflation, the highest in the world, by ordering prices of basic goods to be slashed by half, but this sparked panic buying by shoppers who emptied shop shelves.

On Friday, 17 business leaders were arrested for flouting the government directive to lower their prices. Over the weekend another 16 were arrested, the official media reported. Among those arrested in the latest sweep were the directors of Edgars, a leading clothing and fashion retailer, and supermarket and gas station owners.

At least 200 businesses have already been charged for alleged price violations and 40 market vendors arrested for hoarding goods.

A police representative told state radio some managers had gone into hiding or had taken holiday to avoid police action against them.

"We want to warn them we will pursue them up until they face the full wrath of the law," he said.

Article courtesy of New Zimbabwe

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