HARARE (AFP) — Zimbabwe decided to float its currency on Wednesday in an attempt to eliminate speculation on the black market as hyperinflation continued to ravage the economy.
"The Reserve Bank has with immediate effect introduced a willing buyer-willing seller... arrangement in the foreign exchange market," governor Gideon Gono said at a news briefing.
The official exchange rate in Zimbabwe has been kept at 30,O00 Zimbabwe dollars for one US dollar since September 2007 -- but on the thriving black market, one US dollar can be exchanged for around 100 million Zimbabwe dollars.
Gono said that with the new reforms, "the availability of foreign exchange will gradually improve to a point not experienced over the last few years."
This is the second time in four years the beleaguered southern African country has opted to liberalise its foreign exchange trading system.
In January 2004, Zimbabwe introduced a foreign exchange auction system in which the central bank determined the rate in a bid to narrow extreme differences between the official and parallel rates.
Gono said the currency liberalisation would help tame the hyperinflation "dragon," which was running at 165,000 percent in February, and conceded that price controls introduced by the government were not the cure.
"Through the measures we have unveiled and others that will come, it will soon be evident this dragon cannot be allowed to continue and that we will in fact be dealing a blow to its existence," he said.
Economic experts said the currency move was long overdue, but were wary of interference on the market by the authorities.
"It was a very bold and welcome move. It will work for the economy," John Mangudya, chairman of the Bankers Association, told AFP.
"There was no need to continue starving the economy" of foreign exchange.
A commercial bank economist Witness Chinyama, said "as long as they don't interfere, this liberation will definitely work".
"The last time it was done, there were problems later because of intervention, but I hope this time they won't intervene."
Mangudya said bankers were due to meet on Friday to decide on rates from which trading could kick off.
Zimbabwe has long been experiencing a shortage of foreign currency which means the government has failed to import sufficient vital commodities such as fuel, electricity, food and medicines.
Traditional top foreign currency earners such as tobacco and tourism have nosedived in recent years due to failure of the country's controversial land reform programme and political tensions, critics said.
Once a model of post-colonial success, Zimbabwe is in the throes of its worst economic crisis since independence from Britain in 1980, with unemployment at 80 percent.
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