Zimbabwe will soon issue new bank notes, for the second time in as many years, to try to control rampant inflation and curb black-market trade, central bank Governor Gideon Gono said on Wednesday.
The Southern African country is in the grips of a severe economic crisis — blamed on President Robert Mugabe’s policies — and battling the highest annual inflation rate in the world, at nearly 8 000%.
Zimbabwe lopped off three zeros from its currency in July 2006 and phased out old notes within three weeks in a programme dubbed ”Sunrise”.
”The general public, as well as the financial sector, are hereby forewarned that Sunrise Two is now imminent,” Gono told reporters.
”The Reserve Bank has now put in place all the machinery to enable the implementation of a short and precise changeover programme, which would be completed in a matter of a few days.”
Gono declined to say exactly when the currency change would take place and how many zeros would be dropped.
”The actual changeover will be done without prior notice beyond what we are saying here.”
He added that Zimbabwe’s inflation would not deter the central bank from effecting a currency change.
”Last time we removed three zeros. But they’ve returned. Now we are determined not to allow them to return,” Gono said.
”Some have said we are in a hyperinflationary environment and can therefore not bring in a new currency. Nothing could be further from the truth.”
Cash shortage
The last redenomination took the Zimbabwean dollar to 250 to the United States dollar. While the official rate to the dollar is now Z$30 000 dollars, the black market rate is Z$1,2-million to the US dollar.
Zimbabwe has, in recent weeks, seen long queues at most city banking halls due to cash shortages, which Gono blamed on black market foreign currency trade.
Gono had announced earlier this month the central bank would defer the introduction of new bank notes until 2008, but said he was forced to change the plans due to a resurgent black market.
”As a central bank we have been impelled to now take stern and unprecedented punitive measures against the dark forces of parallel-market trading and financial disintermediation,” he said.
”With a total of Z$58-trillion [$1,93-billion at the official exchange rate and about $48,3-million on the black market] in cash currently in issue and in circulation, the current shortages are principally a result of underground parallel market trading activities.”
At the time of the last currency change, inflation was 993,6% but it has since vaulted above 7 900% and analysts say the figure is actually double that.
A blanket price freeze imposed by Mugabe’s government in June in a desperate bid to rein in inflation backfired and fuelled black market trade in most basic goods and an already thriving informal foreign currency market.
Mugabe denies mismanaging what was one of Africa’s most promising economies and accuses Western nations opposed to his policies of sabotaging the economy to undermine his rule. — Reuters