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Zimbabwe revalues dollar to fight hyperinflation

Latest update : 2008-07-30

Zimbabwe's Central Bank announced Wednesday it will issue new currency notes in an effort to fight the skyrocketing inflation rate that hit 22 million percent in June. Ten million dollars will be revalued to one dollar, starting August 1.

 

HARARE - Zimbabwe will slash 10 zeros from its currency from Aug. 1, central bank Governor Gideon Gono said on Wednesday in another attempt to bring relief to consumers ravaged by hyperinflation.

 

But economic analysts said the move would do nothing to end an economic meltdown blamed on President Robert Mugabe's policies, which have helped to push official inflation to 2.2 million percent, the world's highest, and caused shortages of food and foreign currency.

 

"The Zimbabwe dollar will be redenominated by a factor of one to 10, which means we are removing 10 zeros from our monetary value. Ten billion (Zimbabwean) dollars today will be reduced to one dollar with effective from August 1," Gono said in a television broadcast.

 

"The new currency will co-circulate together with the family of bearer cheques ... which shall cease to be legal tender on the 31st of December 2008," Gono said.

 

Prices are rocketing on a daily basis as ordinary Zimbabweans struggle to survive, prompting the introduction last week of a new 100 billion Zimbabwean dollar note.

 

Businesses justify price hikes as the only measure to avert collapse.

 

Gono in mid-2006 removed three zeros from the local dollar to make life easier for shoppers forced to carry huge piles of cash to make even the simplest purchases, but the move was followed by sharp price rises.

 

The government this month started distributing subsidised basic goods and quietly hiked salaries for its workers to an average 2 trillion Zimbabwean dollars, worth $33 dollars on the official market and as low as $3 on the parallel market.

 

The salary is enough to pay for 10 trips to work at today's fares or buy eight loaves of bread.

 

Mugabe accuses businesses of unfairly increasing prices as part of a wider plot to incite people against his government and on Wednesday warned companies that authorities would impose emergency measures if they continued profiteering.

 

Gono on Wednesday raised the daily cash withdrawal limit from 100 billion Zimbabwean dollars to 2 trillion Zimbabwean dollars, which analysts said was still far short of individual daily cash requirements.

 

"This (re-denomination) is just to overcome the absurd difficulty of having to deal with all those zeros but it does not address the root cause of the problem," John Robertson, an economic consultant, said.

"The problem is of scarcity of foreign earnings and investment inflows. I would like to see the government remove its 51 percent empowerment requirement on all new investments."

 

Mugabe early this year signed into law a bill giving local owners majority control of foreign-owned firms, including mines and banks.

Date created : 2008-07-30

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