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ZIMBABWE: Less money to count as currency devalued
IRIN News
August 01, 2006

http://www.irinnews.org/report.asp?ReportID=54935

Zimbabweans who boycotted the creaking banking system and kept their cash at home have been thrown into panic by a 1,000 percent devaluation announced this week by reserve bank governor Gideon Gono.

In his mid-term monetary policy review on Monday, Gono struck three zeroes off the country's temporary currency of bearer cheques, and gave people until 21 August to deposit the old currency in exchange for new money.

With inflation officially pegged at 1,183 percent, it has been estimated that huge amounts of money in circulation was actually stashed outside the banking system, largely by the informal sector.

Gono ruled that individuals looking to exchange money could only deposit a total of Z$100 million (US$1,000 at the old official rate) a day. Excluding public holidays, that leaves 16 days until the deadline, or a maximum of Z$1.6 billion (US$16,000) that can be exchanged - bad news for parallel market foreign currency traders, or anyone who has not been using the formal banking system.

Describing the new policy as a "sunrise - a new beginning for Zimbabwe", Gono said: "The 21 days are the beginning of far-reaching transformations for our economy, and the beginning of trouble for economic saboteurs who have caused havoc to this economy through speculative and cash-hoarding tendencies."

After the policy announcement hundreds of people rushed to banks, hauling trunks and suitcases of cash to start depositing it. "Like many people, I was keeping money at home to avoid the inconvenience of queuing at the bank every other day," a depositor confided to IRIN.

The manager of one furniture store said they done roaring business as customers made hasty cash payments for furniture running into hundreds of millions of dollars. "It was only after a while that I realised that people were using us to offload excess cash," he commented.

"The only positive thing about Gono's statement is that it will now be easier to carry money around, instead of lugging it around in suitcases," said Johnson Moyo, a shop assistant at a retail store.

"At times we were taking as long as 30 minutes to count money from just one shopper, but the new currency should speed up the process. But as long as the basic economic fundamentals of reviving the manufacturing and tourism sectors are not met, we will soon all be millionaires again."

Roseline Manyika, a cross-border trader, was more concerned with her short-term balance sheet. "I had bought hundreds of money counters from overseas, hoping to make a killing, but with the new developments there is no need for banks to use money counters, which means I am sunk."

Zimbabwe's new exchange rate is US$1 to Zim$250. Last week the official rate was Zim$250,000 to the dollar, and Zim$555,000 on the parallel market.

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