Zimbabwe central bank boss warns govt on fuel

HARARE, July 20 (Reuters) Zimbabwe central bank governor Gideon Gono has warned President Robert Mugabe's government that it risks strangling the already battered economy by banning private fuel purchases in foreign currency.

A severe economic crisis many blame on Mugabe's policies has left the southern African state struggling with chronic food, fuel and foreign currency shortages and the world's highest inflation rate of over 4,500 per cent.

Gono -- who has been spearheading a bid to turn around the economy but has criticised the government's blitz to slash rising consumer prices -- told today's Herald newspaper the scrapping of the fuel scheme, which removes one of the few remaining ways for people to acquire scarce petrol, appeared ill-thought.

A committee enforcing price cuts ordered by Mugabe three weeks ago said the government had banned foreign currency coupons allowing people to get scarce fuel from private oil companies or individual importers.

The facility is also used by foreign diplomats and officials working for international aid organisations, and Gono said in a statement published by the state-run Herald that the move could be disastrous for many in commerce and industry.

The government gave no reasons for the move, but in the past it has accused fuel coupon holders of selling fuel on the black market at highly inflated prices.

''We must avoid good intentions having negative results.

Everything needs to be properly dissected, looking at the pros and the cons so that we do not make rushed decisions,'' Gono said.

''The last thing we want is legitimate fuel that runs mines failing because we have done what we have done ... we have hindered people from going about their normal business.'' The government order that people with coupons must use them within two weeks sparked another wave of panic in the country where many urban residents are already scrounging a living and are spending long hours hunting for scarce foodstuffs.

Fuel points selling petrol in foreign currency were jammed yesterday and today by desperate motorists seeking to fill their cars and put fuel in drums.

''I don't know the point of all this (the scrapping of the scheme)... but it just makes our life more harder,'' one man told a Reuters correspondent at a Harare fuel filling station where the queue stretched for about half a mile.

The Herald newspaper said private fuel dealers had about 10 million litres of fuel in stock while the state-owned National Oil Company of Zimbabwe (Noczim) had three million litres.

Zimbabwe has seen several years of acute fuel shortages, but Mugabe -- who has been isolated by the West over his policies -- has failed to secure concrete fuel supply deals from ''friendly'' countries such as Libya and Equatorial Guinea.

The fuel problems have at times forced public transport operators to pull vehicles off the road, forcing thousands of commuters to walk to work.

Mugabe, 83 and in power since independence from Britain in 1980, has vowed to press on with his controversial policies, saying they are meant to benefit Zimbabwe's poor majority.

The veteran Zimbabwean leader said he had ordered a price slash because businesses were hiking prices in support of a Western-sponsored plot to overthrow his ZANU-PF government.

The government has arrested and fined hundreds of business executives for defying the price freeze while consumers have cleaned shops of basic goods after the blitz, which analysts say is part of a short-term populist drive by Mugabe to retain power in general elections due next March.

Mugabe says Zimbabwe's economy crisis is a result of sabotage by opponents trying to punish him for seizure and redistribution of white-owned commercial farms to landless blacks.

Reuters CS GC1608