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ZIMBABWE: Shaky start to new currency
IRIN News
August 21, 2006

http://www.irinnews.org/report.asp?ReportID=55213

HARARE - Confusion, chaos and protest marked the last day of Zimbabwe's controversial currency switch-over, which saw one currency becoming obsolete and another born in just three weeks.

Although Reserve Bank governor Gideon Gono set a deadline of the close of business on Monday for the old currency as legal tender, many businesses, including government organisations, stopped accepting the old denominations last week.

The government-owned national railways stopped accepting the old money on Saturday, leaving many passengers stranded. The railway network is generally used by lower-income Zimbabweans.

Other businesses followed suit, setting their own deadlines for what they would accept as legal tender. Taxi operator Nathan Hozheli said he had stopped accepting the old currency before Monday's deadline, as he did not want to be inconvenienced.

"The Reserve Bank of Zimbabwe has all but made it a criminal offence to handle [the old] money, and many transporters and business people want to avoid being scrutinised by the authorities," he said.

Gono surprised Zimbabweans when he announced in his mid-year monetary review late last month that the old denominations would be withdrawn and replaced by a new currency. The official exchange rate of Z$101,000 to US$1 was also altered to $250 to one dollar. The parallel market, or black market rate, was Z$600,000 to US$1.

The monetary reforms are designed to halt the economic meltdown: inflation is hovering at 1,000 percent and unemployment levels are above 70 percent.

Roadblocks were set up across the country to search for cash in the run-up to the changeover, and those in possession of more than Z$100 million had their money confiscated, unless they had receipts proving where it had come from.

The short notice and regulations that individuals could only convert Z$100 million a day led to stores and supermarkets reporting a nationwide shopping spree as people tried to offload the old currency.

Many Zimbabweans kept their money at home after several banks were closed by Gono shortly after he assumed the reserve bank governor's office in 2003.

Small-scale farmer Joseph Chipanera arrived on Monday in the capital, Harare, from the rural area of Domboshava, about 100km east of Harare, to buy maize seed and other farming implements to prepare for the upcoming agricultural season, but the agricultural wholesaler refused to accept the old currency.

Chipanera, like about 80 percent of other citizens who had lost confidence in the banking system, kept his money elsewhere. "Because of the constant need to withdraw money from the bank, and the fear that banks could collapse anytime, I had stopped keeping money in the bank as I felt it was safer in my house."

He said he had not heard of the currency reforms. "Some of us were not even aware that there was a new currency - this was news to us. We cannot afford to buy radios or newspapers to get information which was so crucial as this."

According to reports about 180 demonstrators, mostly women, were arrested by riot police in country's second city, Bulawayo, during protests over the unpopular currency reforms. Jenni Williams, a spokeswoman for Women of Zimbabwe Arise (WOZA), an advocacy group, reportedly said the march was to press for meaningful economic reform.

Already, complaints have been made that there is not enough cash in circulation and the design of the new currency is confusing: of the 13 new notes, five are green in colour and could easily be confused in poor light, while four notes are red.

The National Association of Societies for the Handicapped issued a statement pointing out that "the recently introduced bearer notes are of the same size, which makes it difficult for the visually impaired to tell them apart in the absence of Braille."

Gono, who is in China in a bid to attract foreign investment, told the local media there would be no extension of the deadline, but businesses would be permitted to exchange old currency for the new denominations through the central bank on Tuesday.

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