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SADC expert explains Zimbabwe currency stabilisation measure
Monkagedi Gaotlhobogwe, Mmegi
August 08, 2008

http://www.mmegi.bw/index.php?sid=1&aid=10&dir=2008/August/Friday8

Head of policy and strategic planning at SADC, Professor Angelo Mondlane, has said Zimbabwe is not the first country in Africa to slash zeros in an attempt to stabilise its currency.

"We have seen it in Mozambique and Angola. It comes about because of the abnormal situation of war or political turmoil.

If it is a war, the solution is to stop the war first. If it is political strife, stop it and then undertake the necessary stabilisation and adjustment measures," Mondlane said. He said one of the main causes of inflation in Zimbabwe is that there is not enough goods in circulation.

The little, which is available, triggers spiraling prices. Mondlane said the prices keep rising so long as the goods do not stabilise the supply situation.

He said the move to cut the zeroes from a currency is an administrative act that does not determine its value. He said the value of a currency is determined by the power of the economy. "It is not the currency denomination, which changes the weight of the currency," he explained.

Meanwhile, it is reported that prices of goods have increased phenomenally following the introduction of a redenominated currency by the Reserve Bank of Zimbabwe last week. A survey by radio VOP of Zimbabwe revealed that business people in Zimbabwe have taken advantage of the new currency to double prices.

The Business Weekly of Zimbabwe reported on its website that prices in Zimbabwe only appear cheap in numerical terms yet they are exorbitant in real terms. "A two-litre bottle of cooking oil went up to Z$120 in new currency, which is Z$1.2 trillion in old currency," the Business Weekly reported.

A two-kilogramme packet of sugar is now selling at an average of Z$50 from Z$25, a loaf of bread is now Z$25 that is Z$250 billion in old currency from an average of Z$15. Comfort Muchekeza, the Consumer Council of Zimbabwe spokesperson for the Southern region bemoaned the price hikes and urged the government to crackdown on businesses to restore sanity.

Zimbabwean President, Robert Mugabe, last week warned that his government might have to declare a state of emergency to contain an economic crisis that has seen prices rise on a daily basis while inflation has shot to 2.2 million percent, the highest in the world.

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