Zim currency 'becoming unusable'

Zimbabwe's fast depreciating currency is increasingly being rejected by traders as they battle a severe economic crisis, the head of the country's main industry body said on Friday.

Zimbabwe's currency hit new lows this week, trading at Z$1.2bn against the US dollar on Friday amid political uncertainty over a presidential run-off election set for June 27.

The poll pits Robert Mugabe against opposition leader Morgan Tsvangirai.

Callisto Jokonya, president of the Confederation of Zimbabwe Industries (CZI) accused Mugabe's government of printing money, driving inflation and undermining the currency.

"We need to act as a matter of extreme urgency to reduce money supply growth. If we continue with the current policy of injecting massive amounts of liquidity into the economy, we will continue to see a continuous depreciation of the local currency," Jokonya said.

"This will make doing business more and more difficult and we will reach a point where we risk the local currency becoming unusable."

In May, Zimbabwe introduced special high-value "agro-cheques" which the central bank said were meant for convenient payments to farmers during the current agricultural marketing season.

These notes, in 5 billion, 25 billion and 50 billion denominations, are now largely used across the economy, effectively becoming regular banknotes in the inflation-ravaged economy.

But the CZI said the moves had failed to stop the declining confidence in the currency.

"Already, we are seeing in both urban and rural areas a phenomenon where small traders, landlords and individuals are refusing payment in local currency and insisting on either barter deals, for example payment in cooking oil or foreign currency," Jokonya said.

"Our number one enemy is the excess of the Zimbabwe dollar on the market."

State media reports on Friday said the central bank could soon slash some zeros off the currency to help consumers cope with the effects of inflation, officially at over 165000% and the highest in the world.

Analysts estimate inflation to be considerably higher.

Critics blame Mugabe's policies, such as the seizure of farms from whites to resettle blacks, for the economic crisis, which is also shown by 80% unemployment and shortages of food, fuel and foreign currency.

But the veteran ruler denies ruining one of Africa's most promising economies and blames Western sanctions for the crisis.