Revaluation cuts 10 zeroes off Zimbabwe dollar
By Tony Hawkins in Harare
Published: July 31 2008 03:00 | Last updated: July 31 2008 03:00
The Reserve Bank of Zimbabwe yesterday lopped 10 zeroes off the value of the Zimbabwe dollar, thereby revaluing Z$10bn of existing currency to one Zimbabwe dollar from tomorrow.
Gideon Gono, central bank governor, said the revaluation was necessary to "address cash constraints in the payments system" as well as "challenges" to financial and accounting IT systems caused by the proliferation of zeroes.
Independent estimates put Zimbabwe's inflation rate well above the official 2.2m per cent - the world's highest. The economic crisis has been blamed on President Robert Mugabe's policies, whichhave led to shortages of food and foreign currency.
While bankers and economists welcomed the move, one warned it was "a Band-Aid that will ease the currency crisis for a few months and no more".
Mr Gono repeated his plea for a social contract between government, business and the trade unions, suggesting an immediate six-month moratorium on price rises. This was immediately rejected as impractical by business and labour unions.
On informal foreign currency markets, the Zimbabwe dollar is valued at Z$1,000bn to the British pound - making a revalued Z$1 worth one penny.
At present, Zimbabweans can withdraw a maximum of Z$100bn a day from their bank accounts, but this will be increased tomorrow to Z$2,000bn (before revaluation) or Z$200 ($4, €2.5, £2) in the new revalued money. The largest denomination note will now be Z$500.
The reforms are designed to counter the stampede into dollarisation of recent months. Consumers have been forced to pay for goods and services in US dollars or South African rand either because sellers have refused to accept the Zimbabwe currency or because they have not been able to withdraw enough cash.