Zimbabwe’s central bank devalued its dollar by 60% on Monday after announcing it had decided to knock three zeros off all banknotes to help consumers cope with hyperinflation of nearly 1 200%.
”With immediate effect the inter-bank exchange rate has been adjusted to the trading level, after the removal of the three zeros … to 250 Zimbabwe dollars to one United States dollar,” central bank head Gideon Gono said in a televised address.
Based on the currency’s old official exchange rate of $1 to Z$101 195 after knocking off three zeros the new rate amounts to a 60% devaluation, based on International Monetary Fund methods.
”Our currency is in trouble. Our people are experiencing incredible hardships and inconveniences associated with too many zeros,” Gono said.
”All monetary values … have been re-based by striking out three zeros,” he said in a televised monetary policy review.
Gono said the change to new currency denominations will take effect on Tuesday and Zimbabweans had to phase out old banknotes within three weeks.
Zimbabwe’s sliding dollar has been officially devalued several times over the past few years, helping to fuel four-digit inflation, which is currently the highest in the world.
The economy of the Southern African country — once a regional breadbasket — has shrunk by more than a third during the past eight years of recession, while unemployment is estimated at between 70% and 80%.
Gono also slashed the country’s main lending rate by 550 percentage points to 300% on Monday as part of efforts to kick-start the ailing economy.
Analysts say very little lending has been taking place in Zimbabwe, where the local currency has been trading at a fraction of the official exchange rate on an illegal parallel market. — Reuters