The government of Zimbabwe on Tuesday announced that it would abolish the highest denomination of the country’s currency in circulation within 60 days as one way to curb the current cash shortage that has hit the country.
Zimbabwe is in its fourth month of a local cash crunch attributed to a sharp rise in inflation, a growing foreign exchange parallel market and lack of confidence in the system that have led to higher demand for cash and hoarding.
Admitting that the current ”severe cash shortage” was unprecedented, Finance Minister Herbert Murerwa, said as a way to encourage people to deposit into banks the cash they were hoarding, the current 500 dollar note (0,63 US dollars) would
lose value after 60 days.
”Government will introduce a new 500 dollar note within the next 60 days by which time the current 500 dollar note will cease to be legal tender,” Murerwa told reporters.
A law to prevent hoarding of and trading in cash is to be put in place immediately, the minister said.
Although lacking estimates of the amount of cash not circulating but being stashed away for trading on the parallel market, Murerwa said the central bank had been injecting 700 million dollars into the market daily but that did not ease the shortage.
Inflation in the troubled southern African nation more than doubled in 18 months from 112% at the end 2001 to 365% last month, yet the currency in circulation only rose from 90-billion dollars to 170-billion dollars over the same period.
The introduction of a higher denomination note of 1 000 dollars which was scheduled for the end of November, has been brought forward to the start of October.
Murerwa said retailers would be required to deposit their cash with banks ”promptly” and that banks had abolished handling charges levied for deposits and withdrawals of cash.
Tempers have been rising at banking halls in recent days as people tried to withdraw their wages to pay end-of-month bills with some failing to get what they wanted.
Economists have described the cash shortage as an ”emergency of the highest order”.
The government also set up a cabinet task force to handle the cash crisis. – Sapa-AFP