Zimbabwe's gold production is expected to decline from 21,330 kg last year to an estimated 15, 869 kg this year owing to persistent foreign currency shortages, high inflation and low Zimbabwean dollar prices.
Presenting a paper at a National Economic Consultative Forum meeting on Wednesday, mineral economist Dany Matyanga said gold production during the first five months of 2005 stood at 6,612 kg.
He said although the supporting price of gold has increased, they fall short of expectations based on inflation developments alone.
The major sections of the gold industry that had responded by reducing production were small-scale producers and custom milling operators, he said.
This, he said, was the same sector that responded favorably when the gold support price was hiked to levels above that of the parallel market in October 2003, leading to high levels of production in 2004.
He said large-scale gold producers were also being affected by the shortage of foreign currency.
"The increase in costs have forced most gold producers to take the option of being paid in Zimbabwean dollar, giving up their foreign currency entitlement. This has literally shut the door for them in terms of acquiring imported inputs," he said.
According to latest Reserve Bank of Zimbabwe figures, the mining sector contributes 35 percent to total foreign currency earnings, with gold being the highest foreign currency earner as a single commodity.