Reserve Bank governor Gideon Gono sees the introduction of a new currency
that will lop off ten zeroes from the old currency, effectively revaluing
Z$10 billion to one Zimbabwe dollar, as the solution to the country’s
hyperinflation.
On 4 August, US$1 was equivalent to Z$75 on the parallel currency exchange
market. The largest denomination of the new currency is Z$500 (US$6.60).
The new attempt to curb inflation – estimated at 2.2 million percent by the
government and at more than 15 million percent by independent economists –
was announced in Gono’s half-yearly monetary policy statement on 30 July and
implemented two days later.
He said the new notes, along with the bearer and agro cheques being used as
currency, would remain in circulation until 31 December. He recommended that
wage and salary increments be frozen for six months.
“The six-month moratorium is suggested here as the most credible foundation
and seed for the retransformation of market trends and micro-level pricing
behaviour into stable and predictable modes,” he said.
President Robert Mugabe, 84, who attended the monetary policy presentation,
threatened to impose a state of emergency if the business sector continued
to adjust its prices in line with the hyperinflationary environment.
“We have the power to invoke further measures, but we do not want to use the
emergency rules. Emergency measures can be taken but we do not want that
yet. We can do that to deter unjustified price increases,” said the
president, who has ruled for 28 years.
A bank manager, who declined to be identified, told IRIN that they had not
received the new notes. “Our only problem is that the maximum withdrawals
have been increased to Z$2 trillion (US$200) per customer per day, and as a
result we have run out of cash. The Reserve Bank has not given us any
additional supplies of money.” Delivery vans were parked outside the central
bank, waiting to transfer the new currency to rural areas.
The printing money habit
The notes were manufactured in 2007 by a German company, but additional
trade restrictions imposed after Zimbabwe’s elections in March were
dismissed as a sham by the European Union, led paper suppliers Giesecke &
Devrient cancel their contract.
The decision put pressure on an Austria-based company, Jura JSP, which
provides the specialised software used to print forgery-proof bank notes, to
review its business relationship with Mugabe’s government.
The EU has frozen bank accounts and slapped travel restrictions on
Zimbabwe’s ruling elite in protest against the government’s human rights
violations.
The main causer of hyperinflation is Gideon Gono, who is printing money,
which is being used for handouts and is being given to political thugs to
beat up people
In August 2006, Gono chopped three zeroes from the currency in a bid to
contain inflation, which was then running at 1,183 percent, describing his
policy as a “sunrise – a new beginning for Zimbabwe”.
Independent economist Tony Hawkins dismissed Gono’s latest strategy as
little more than posturing. “What monetary policy? That was a political
statement that was made. The nonsense about Zimbabwe being under sanctions
was not monetary. There were a few currency changes, but that is where it
ends. Freezing wages is not going to end hyperinflation,” he told IRIN.
“The main causer of hyperinflation is Gideon Gono, who is printing money,
which is being used for handouts and is being given to political thugs to
beat up people.”
Hawkins said unless there was a political settlement, the zeroes would be
back on the currency in a few months. “We are looking at a situation whereby
the (US) dollarisation of the economy is going to increase, because our own
money would have become worthless.”
The ruling ZANU-PF party and the opposition Movement for Democratic Change
are engaged in negotiations, but no settlement has been reached.
(IRIN)
Post published in: News