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Sunrise II - Index of articles and reports on Gono's attempt to change the currency in 2007
Money
for nothing
IRIN News
January 04, 2008
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the index of articles on currency reform - Sunrise II
http://www.irinnews.org/Report.aspx?ReportId=76093
Attempts to
alleviate Zimbabwe's critical cash shortages through the introduction
of higher denomination notes are so far proving ineffective, as
long bank queues have remained into January 2008.
Late last year,
Reserve Bank of Zimbabwe Governor, Gideon Gono, introduced three
high denomination bearer cheques, Z$250,000 (about US$0.12 at the
parallel market rate of US$1 dollar to Z$2 million), Z$500,000 (US$0.25)
and Z$750,000 (US$0.37), after initially announcing the phasing
out of the Z$200,000 (US$0.10) bearer cheques, which he said were
now in the hands of "cash barons" who were selling the
notes as a commodity.
"Of the
Z$67 trillion (US$33,5 million) which has been printed, we can only
account for Z$2 trillion (US$1 million) which is in the formal banking
system. The rest of the money is with cash barons who have opened
mini-central banks at their houses. Unfortunately the people doing
that are influential citizens with leadership positions," Gono
told IRIN recently.
Zimbabwe, which
is battling the world's highest inflation rate officially pegged
at 8,000 percent - but unofficially estimated by independent economists
at 25,000 percent - has seen cash join a catalogue of other shortages,
which include fuel, electricity and food.
Gono said that
high ranking people within Zimbabwe's corridors of power hoarding
cash were known to him. Some such as an advisor to the Reserve Bank,
Jonathan Kadzura, found to have taken $10 billion (US$5,000) of
the freshly minted $500,000 (US$0.25) notes out of the banking system
have been exposed. While David Butau, chairperson of the Finance
Parliamentary Portfolio Committee and a Member of Parliament in
the ruling ZANU-PF fled to United Kingdom last week amid reports
of irregular financial dealings.
Individuals
are only permitted to withdraw a maximum of Z$50 million (US$25)
daily, while companies can make daily withdrawals of $100 million
(US$50).
The Reserve
Bank's decision to withdraw the $200,000 (US$0.10) bearer cheques
as legal tender on 31 December 2007, was rescinded without explanation,
although vendors had stopped accepting the $200,000 (US$0.10) bearer
cheques well ahead of the new year's eve deadline.
Simple
economics
Sipho Manyumbu,
a school teacher in the capital Harare who spent the holiday season
in bank queues, said it was nonsensical for Gono to claim that the
cause of the money shortage was a consequence of the rise of the
cash baron.
The issue is
that the money is with the people ... But they cannot use it because
there is either nothing to buy or the goods have just become too
expensive "Simple mathematics will prove to the Reserve Bank
governor that the Z$67 trillion (US$33,5 million) he is mourning
about if divided by 14 million Zimbabweans (the country's estimated
population) will leave each person with about Z$6 million (US$3),
which is not enough to buy a kilogramme of meat.
"With our
inflation now way above 20,000 percent, it no longer makes sense
to keep money in the bank because getting it out is cumbersome.
I now withdraw all my salary and keep the money at home but so far
I have not been able to get any money."
Tendai Musemburi,
a former banker, told IRIN that while there were people hoarding
cash to exchange for foreign currency, its effect was negligible.
"The issue
is that the money is with the people. There is a lot of money chasing
very few goods because of the decline in the manufacturing sector
... But they can not use it because there is either nothing to buy
or the goods have just become too expensive," he said.
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