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The return of the 000s
Kuda Chikwanda, The Zimbabwe Independent
June 16, 2007

http://www.ocnus.net/artman2/publish/Africa_8/The_Return_of_the_000s.shtml

Just 10 months after slashing three zeros from the local currency, Reserve Bank of Zimbabwe (RBZ) governor, Gideon Gono, has come under renewed pressure to remove another set of naughts because the accounting systems can no longer cope with the figures due to hyperinflation. Bankers told businessdigest that Zimbabwe's high inflation poses a technical risk to the stability of information technology (IT) systems. The bankers said very soon their IT systems would not be able to cope with the increasing digits in the local currency. They warned that banking systems could crash in the next few months if the central bank does not move to rectify the situation. Inflation continues to rise at an alarming pace, inevitably bringing back the zeros on the face of bearer cheques. Media reports this week said inflation rose to 4 530% from 3 700% in April. The Central Statistics Office had not released the figures at the time of going to press yesterday.

CBZ Bank managing director, John Mangudya, said whilst his bank was protected from the return of the zeros, he is not sure how they would transact with other financial institutions which have not yet upgraded their IT systems. "The major problem is trade. It becomes difficult to transact with some of our counterparts who are yet to upgrade and cannot cope with the return of the zeros. The whole economy has to upgrade," Mangudya said. Mangudya said inflation has now compromised trade between banking institutions. A senior executive with Kingdom Financial Holdings Ltd (KFHL) said hyperinflation had caused the return of the zeros and was fast becoming a threat to the financial services sector. "There is now more punching in work, and data storage is used up faster. If you look at the cash required everyday, it is now a challenge," the KFHL executive said. "It's like we are back to square one," he said. "It is now back to the millions and billions that we had become used to before the zeros were removed. Very soon we will be talking of trillions again."

FBC Holdings group marketing director, Agrippa Mugwagwa, said they were very concerned about the zeros coming back. He said FBC was in constant discussions with the central bank on the matter. Institute of Chartered Accountants of Zimbabwe (ICAZ) chief executive, Sonny Mabheju, said the trend with which inflation has continued to rise unabated would almost certainly result in the crashing of banking IT systems. "By the time the zeros were removed last year, most systems were failing to accommodate the digits. Most institutions are still using the same software and the same hardware. The rate at which month-on-month inflation is rising certainly spells doom," Mabheju said. He said while no time frame could be attached, the threat of systems collapsing was already imminent.

Gono revalued the Zimbabwean currency in August last year after concerns from the banking community that the increasing number of digits caused by high inflation created technical risks for their financial systems. The exercise saw $1 000 of the old family of bearer cheques being revalued to $1 under the new family of bearer cheques. However, inflation has continued to increase sharply as the economic crisis deepens. At the time of revaluation last year inflation was 1 204%. The dollar has lost 98,3% of its value since last August forcing the RBZ to constantly review the maximum cash withdrawal limits. The central bank has also introduced new $50 000 and $5 000 bearer's cheques. The Consumer Council of Zimbabwe breadbasket for a family of six has increased by 4 909% since September last year when it was $112 034. It is now $5,5 million. In August last year bread was $80 000 and after revaluation it cost $80. A loaf of bread now costs $24 000. Bearer cheques were first introduced in 2003 after the highest denomination of bank notes - the $1 000 - was driven out of circulation by rampant inflation.

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