Tuesday, July 29, 2008

Zim to knock zeros off currency

Zimbabwe's bank chief plans new steps to address currency problems -- removing "more zeros" from the plummeting Zimbabwe dollar and raising the limit on cash withdrawals -- to tackle the country's runaway inflation and cash shortages, state media reported.

Previous currency revisions have failed to tame Zimbabwe's inflation -- officially pegged at 2.2 million percent a year but estimated by independent analysts to be closer to 12.5 million percent.

It has become nearly impossible to access cash as the country's economic collapse worsens.

Authorities last week released a new $100 billion bank note. By Sunday it
was not enough even to buy a scarce loaf of bread in what has become one of the world's most expensive -- and impoverished -- countries.

The Sunday Mail, a government mouthpiece, reported that the central Reserve Bank governor, Gideon Gono, said at an agricultural show that he would introduce the new measures in the coming days to make sure cash shortages are a "thing of the past."

Zimbabwe's government says Western sanctions -- tightened last week -- are the main cause.

Critics blame mismanagement by Robert Mugabe's government and a land-reform program that slashed the country's agricultural production.

To improve liquidity on the market, Gono planned to remove "more zeros," the paper reported.

"This time, we will make sure that those zeros that would come knocking on the governor's window will not return. They are going for good," Gono was quoted as saying.

In 2006, the central bank slashed three zeros from the currency when inflation stood at a few hundred percent, already the highest rate in the world.

Computers, electronic calculators and automated teller machines at banks have not been able to handle basic transactions in billions -- nine zeros -- or trillions -- 12 zeros -- or even quadrillions, with 15 zeros.

A new laptop computer was advertised Sunday at 1.2 quadrillion Zimbabwe dollars. That's the equivalent of about $25,000 at the official exchange rate, $8,500 at the black-market cash exchange rate, or $2,000 at a third exchange rate used in electronic money transfers through bank accounts that do not involve the physical issue of Zimbabwe dollar bank notes.

Zimbabwe's money shortages, inflation and chronic shortages of food, gasoline, medicine and most basic goods have brought many businesses in Harare to a standstill.

Smaller shops and at least four main restaurants have shut down. State media reported Saturday that nightclubs were cancelling music shows because audiences dried up after a 2,000 percent increase in prices for beer and soft drinks in the past week.

Several bars and clubs were openly accepting U.S. dollars, even though that is against the law.

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