Cabinet throws out Gono’s advice

Cabinet last week shot down proposals by Reserve Bank governor Gideon Gono to review Zimbabwe's exchange rate, amid reports President Robert Mugabe was developing a penchant for shooting down sound policy advice from the increasingly ostracized central bank chief.
Gono, in a

bid to placate the restive private sector calling for a devaluation since the August 2006 review, failed to sell the idea to ministers, crucial in getting Mugabe’s assent on an issue that has been described a “hot political potato.”
This is the second time inside a month that Mugabe and his cabinet have ignored policy advice from the governor after the snubbing of 59 pages of policy advice on the price slash.
The government devalued the Zimbabwe dollar by 60 percent last August to Z$250 to the greenback at the request of the private sector, which had been threatened by mass closures due to viability problems.
Under a tripartite deal involving government, labour and business, the state promised to review the exchange rate three months after the devaluation on the assumption that exporters would have liquidated their receipts by then.
But the foreign currency situation turned worse, as if the respite given industry had triggered a flight of hard cash rather than attracting it, sources said.
Gono reportedly presented his recommendations together with a raft of measures to stabilize the economy amid reports the comprehensive dossier also contained warnings against price controls and further land grabs.
Last week Gono also warned the taskforce enforcing the price slash to steer clear of the banking sector. Gono stated that the financial services sectors should be exempt from “unguided inspection, unguided dialogue, unguided visitation or probe.”
The wording clearly betrayed the governor’s frustration with the populist price slash policy. There were also reports that Gono was due to announce the introduction of new currency with his monetary policy, which has since been postponed.

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