Back to Index

Zimbabwe to cut ten zeros from banknotes in fight against inflation
Sebastien Berger, The Daily Telegraph (UK)
July 31, 2008

View article on the Telegraph website

Zimbabwe's ravaged currency is to be revalued from Friday, the government has announced, slashing 10 zeros off all prices and values.

Hyperinflation has destroyed savings and reduced the economy to subsistence levels, with bricks of banknotes needed for even basic transactions. The Zimbabwe dollar was worth more than the American greenback at independence in 1980, but Robert Mugabe's misrule has seen it plunge to a point where one pound is worth around Z$200 billion, and accelerating downwards. Officially, inflation is now running at 2.2 million per cent a year, but independent economists estimate it is far higher. Last week a packet of locally manufactured biscuits cost Z$489 billion. A teacher at a private primary school earned Z$485 billion a month, illustrating the impact of the price rises on salaries paid in arrears. Bread - on the rare occasions it is available - was costing Z$200 billion a loaf, a can of Coca-Cola Z$600 billion, a plate of rice and scrawny chicken Z$800 billion, a beer Z$1.8 trillion and a local ride in a shared minibus Z$2 trillion - the same as a civil servant's monthly wage.

The largest note is the newly-introduced 100 billion dollar bill, and most cash-handling machines, such as shop tills, are only designed to cope with a maximum of 14 digits, so even shopping is a challenge. "The Zimbabwe dollar will be redenominated by a factor of one to 10, which means we are removing 10 zeros from our monetary value. Ten billion dollars today will be reduced to one dollar with effective from August 1," said Gideon Gono, the central bank governor. The largest new note will be worth 500 new Zimbabwe dollars, or five trillion current dollars. Coins, which have been obsolete for years, will also return, and existing notes will be valid until the end of the year. The German company supplying the paper for Zimbabwe's banknotes recently said that it would stop doing so, but it is understood the new currency was printed some time ago and has been held in storage in the meantime.

The revaluation comes two years after the last such exercise, when three zeros were taken off the currency in a move dubbed "Operation Sunrise". But it proved to be a false dawn, and economists have warned that simply issuing new notes will be merely cosmetic without fundamental accompanying reforms, such as the government ceasing to print ever more bills simply to meet its own needs. "This is just to overcome the absurd difficulty of having to deal with all those zeros but it does not address the root cause of the problem," said John Robertson, an economic consultant. "The problem is of scarcity of foreign earnings and investment inflows." A Harare-based finance specialist added: "At least three zeros will be back by the end of August." Immediately after the announcement, Mr Mugabe, who blames Western sanctions and profiteering businessmen for the economy's travails, went on television to warn: "Entrepreneurs across the board: Don't drive us further. If you drive us even more we will impose emergency measures."

Please credit www.kubatana.net if you make use of material from this website. This work is licensed under a Creative Commons License unless stated otherwise.

TOP