Gono slashes 10 zeros from Zimbabwe currency

By Violet Gonda
30 July 2008

Reserve Bank governor Gideon Gono announced on Wednesday that the Zimbabwean currency will be slashed by ten zeros. From August 1st Z$10 billion will become Z$1.

The RBZ governor said: “The new currency will co-circulate together with the family of bearer cheques ... which shall cease to be legal tender on the 31st of December 2008.”
Practically the removal of the zeros will make life easier for people as it was becoming a nightmare to carry such huge amounts of money and computer systems in the banking sector have not been able to handle the number of zeros.
However economists predict the zeros will come back again very soon as the latest measures do not address the causes of the hyperinflation and are not being followed by meaningful reforms, such as addressing the unavailablity of foreign currency and low investment in Zimbabwe, which are all politically based.
Today life has become unbearable for Zimbabweans as a result of the hyper-inflation, officially running at more than 2 million percent while analysts say it is actually more than 15 million percent.

The discrepancies between how much people earn and their expenditure just doesn’t add up. For example, employees at the National Railways of Zimbabwe earn Z$60 billion, but a loaf of bread costs more than Z$250 billion.

Raymond Majongwe, the Secretary General of the Progressive Teachers Union of Zimbabwe, said this month that teachers were paid salaries ranging from Z$1.5 trillion to Z$2.4 trillion but a kilogram of beef in the supermarkets is going for Z$1.4 trillion. He said; “This means the government paid the teachers just a kg - an amount that can only buy a kg of beef.”

The salaries also don’t cover transport for workers in most cases.

Economic analyst Lance Mambondiani said the slashing of zeros is not really intended to benefit the ordinary person and will only be a convenience, while not increasing their purchasing power.

In 2006 the RBZ slashed the dollar by three zeros and analysts say this will just continue to happen if the regime does not address the economic policies that are causing hyper-inflation. “Which is making sure that we go back into facilitating or stimulating our economic productive sectors like the manufacturing sector, the agricultural sector…and there is a need to make sure that the political impasse that is, is resolved,” Mambondiani said.

Gono’s re-denomination of the dollar came on the same day that Robert Mugabe warned the business sector that emergency powers would be imposed if they continued ‘profiteering.’ However the business society says it is forced to hike prices because of the unmanageable economic environment.
Mugabe made the threats in a televised address to the nation as South African President Thabo Mbeki flew in to meet with him about the talks. The South African facilitator had met Morgan Tsvangirai in South Africa on Tuesday and was also expected to meet the other MDC leader, Arthur Mutambara, on Wednesday in Harare.
Mbeki said the talks between the political parties had adjourned so that the negotiators could brief their leaders, but that they would resume on Sunday.