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Devalued currency fuels run on banks
Peta Thornycroft and Christopher Munnion, London Daily Telegraph
August 02, 2006

http://www.washtimes.com/world/20060801-104038-1083r.htm

JOHANNESBURG -- Banks in Zimbabwe were swamped by panicking customers yesterday after the central bank announced that three zeros were being lopped from the value of the Zimbabwean dollar to counter the 1,200 percent inflation rate, the highest in the world.

Confusion about the effective devaluation of the currency prompted hundreds to jostle one another in lines to deposit millions of bank notes thinking they had to "legalize" their hoards of cash within the day. Several banks across the country closed doors intermittently to avoid the rush of depositors.

The Reserve Bank of Zimbabwe also made it illegal to hold more than the equivalent of $41 in cash.

"We have to go to the Reserve Bank this minute as we have to explain that we had all this money on us, [about $412] to pay wages on Friday," said a harassed businessman in the capital, Harare, who asked not to be named.

Gideon Gono, governor of the Reserve Bank, announced the changes during a televised address on Monday.

"Our currency is in trouble. Our people are experiencing incredible hardships and inconveniences associated with too many zeros," Mr. Gono said.

He said Zimbabweans had three weeks to exchange bearer bonds -- vouchers used as currency -- for a new series reflecting the new values.

"This is just one monetary mechanism to help make commerce and everyday life more convenient," Mr. Gono said.

The country's rampaging inflation has obliged Zimbabweans to carry large blocks of currency for the most basic commodities. A loaf of bread, for instance, can cost more than 1 million Zimbabwean dollars (about $9).

The country's banks also have struggled to keep pace as their software strains to deal in 14-digit trillions and even larger quadrillions in commercial dealings. Everyone now will ignore the last three zeros on bank notes. A 10,000-dollar bill now will be worth 10 dollars.

President Robert Mugabe blames domestic and foreign "enemies" for his country's perilous economic state but economists point to the erosion of the agricultural sector after the "land reform" program under which 4,000 white-owned farms have been arbitrarily seized by the government.

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