/ 1 August 2008

New banknotes, same problems in Zimbabwe

Zimbabwe rolled out a new set of banknotes and coins on Friday to ease the effects of a ravaging economic crisis, but for many people the move was merely confirmation that authorities have lost the battle against inflation.

The government of Robert Mugabe started replacing billions of dollars of currency in circulation as inflation spiralled out of control. Official inflation stands at 2,2-million percent, the world’s highest.

Zimbabwe central bank Governor Gideon Gono on Wednesday announced that from August 1, the local currency would be redenominated by removing 10 zeros from a Zimbabwe dollar. The highest note was Z$100-billion.

”Other than making it easier for us to count and to carry around, our problems have not gone away,” said Lameck Chamunorwa as he left a bank after withdrawing Z$200 in new notes.

”It’s like we are pretending that things are getting normal when the truth is that they are doing this [introducing the new currency] because we are in a bad state and far from normality,” said the 28-year-old shop cleaner.

The new set of notes — from Z$1 to Z$500 — will circulate alongside the higher-denominated currency being phased until at the end of the year.

Long queues formed throughout the day as people sought to withdraw money from banks.

Zimbabwe’s economic crisis — also highlighted by chronic shortages of food and fuel, and massive unemployment — has forced Mugabe to negotiate with the main opposition Movement for Democratic Change in talks expected to usher in a government of national unity.

Critics accuse Mugabe of destroying one of Africa’s most promising economies with controversial policies, including his seizures of white-owned farms for redistribution to black people, and see no hope for the country without a change in government.

John Robertson, a leading Zimbabwean economic consultant, said the new banknotes will have no effect on an economy that has shrunk by almost two-thirds over the past decade.

”These are very artificial reforms,” he said. ”What the country needs is a change in direction, a change in policies that are affecting local and foreign investment, and real respect for private property rights.” — Reuters