Zimbabwe to pay soldiers, teachers in US dollars

HARARE, Feb 19 — Zimbabwe tried to combat the world's highest inflation by widening the use of foreign currency yesterday — the first act of a coalition government that gave the longtime opposition control of much economic policy.

Finance Minister Tendai Biti, a veteran opposition leader, told reporters that some 130,000 soldiers, teachers, civil servants and other government workers will now receive payment in US dollars instead of local currency. The US$100 (RM360) monthly salary will be a raise for most government employees, who had seen their buying power drop to the equivalent of US$30 a month because of inflation.

Biti also scrapped licences required for shops doing business in foreign currency. The change will allow more merchants to legally trade in dollars and South African rand.

But even as the new coalition took its first steps, a judge ordered the opposition's nominee for deputy agriculture minister jailed for at least two more weeks pending trial on terrorism charges.

Prime Minister Morgan Tsvangirai, leader of the opposition Movement for Democratic Change, called Roy Bennett's arrest last week an attempt by factions in the President Robert Mugabe's party to derail the power-sharing deal, which forced several of his top aides to hand Cabinet posts to MDC politicians.

The detention of Bennett and several other opposition figures and independent human rights activists in recent weeks raises the pressure on Tsvangirai to convince supporters that joining a government with Mugabe and his ZANU-PF party was not a mistake.

The MDC called for the release of Bennett and said the new government must assure "Zimbabweans that it respects citizens' human rights."

Critics blame Mugabe — in power for nearly 30 years — for political repression and an economic collapse that has seen worsening hunger, a widening cholera epidemic and spiralling prices.

Ordinary Zimbabweans have long since stopped doing business in virtually worthless Zimbabwean dollars. Mugabe's party partially opened the economy to stable currencies like the US dollar, rand and British pound. Schools and hospitals are allowed to charge in foreign currency. Crumbling power and water utilities also have been charging in foreign exchange. Bus drivers demand fares in foreign currency and even the Herald, the state-controlled daily newspaper, began printing its price as US$1 over its masthead last month.

Biti's announcement represented a broadening of that strategy in an attempt to halt the skyrocketing inflation and wider economic disaster.

"Now that the country has embraced the use of multiple currencies which are relatively stable, the government expects all businesses to act responsibly on pricing ... in order to create the necessary confidence in the economy," Biti told reporters.

Last year, official inflation based on the tumbling local Zimbabwe dollar was given at 231 million per cent but the state statistics office said it was no longer able to calculate the inflation rate because of acute shortages of gasoline, food and most goods that spurred black-market dealings.

Biti said new statistics on inflation would be released next month.

Other moves announced by Biti included raising interest rates on private bank accounts to foster "a savings culture." Previously, Zimbabweans had been reluctant to keep their money in banks because it lost value so quickly, and because limits on daily withdrawals had made it time-consuming to access.

Private companies would also be required to pay taxes in foreign currency.

Obsolete local credit cards were to be revived in hard currency as the country gradually moved away from cash transactions "to the use of plastic money," Biti said.

"We have to get Zimbabwe working again," Biti said.

Much of the foreign currency in use in Zimbabwe comes from some 4 million Zimbabweans — about a third of the population — who are living and working abroad after fleeing years of political and economic turmoil.

The hunger crisis in the former regional breadbasket has left up to 7 million people dependent on foreign handouts and the cholera epidemic blamed on collapsed water, sanitation and health services has killed over 3,600 people since August. — AP