Zimbabwe's new currency brings no relief
August 23, 2006
By Fanuel Jongwe
Harare - Zimbabwe converted to a new currency on Tuesday in a move aimed at stemming runaway inflation but analysts said it would do little to halt a downward spiral in the southern African country's economy.
Zimbabwe's Reserve Bank slashed three zeroes from its currency on July 31 and set a 21-day ultimatum that expired at midnight on Monday for old notes to be handed over in exchange for new dollar bills.
Central bank chief Gideon Gono said the currency change would snuff out a burgeoning parallel foreign currency market and bring relief to shoppers who have had to carry bagfulls of cash on regular trips to the supermarket.
"It returns to us stability and convenience and, of course, this is just one monetary mechanism to help make commerce and everyday life more convenient," Gono said.
But finance experts argued that the move failed to address the underlying faults in an economy saddled with the world's highest inflation rate outside a war-zone. "There is no way this is going to arrest the economic decline," James Johwa, an analyst with a Harare-based economic thinktank, told AFP.
"Many issues such as the state of our relations with other countries, archaic laws which remain in place and lack of harmony between the government and the opposition need to be addressed before we start talking about mending the economy." Zimbabwe was isolated by its former trading partners in the West and its leaders blacklisted in 2002 following controversial presidential elections the opposition charged were rigged.
The economy has been steadily declining over the past seven years, characterised by inflation running at around 1 2000 percent and high employment with at least 80 percent of the population living below the poverty threshold.
Inflation, often referred to as "our number one enemy" in government circles, peaked at nearly 1 200 percent in April before declining in July to 993.6 percent.
"Nothing has changed," independent economist Tony Hawkins told AFP, referring to the unveiling of the new set of bearer cheques ranging from one cent to Z$100 2000.
"Inflation remains high, prices are still rising. This is an unnecessary move perhaps meant to satisfy certain political motives but it will have no impact on the economy.
"If anything, the new currency will make things worse because a lot of money is going to be spent printing useless notes such as the one cent bearer cheque which is worth nothing in real terms." He said "a lot of time" was being lost as people went scrounging for change as there were reports of a shortage of low-denomination bank notes. Another independent economist John Robertson characterised the currency reforms as window-dressing.
"The change is purely cosmetic and will only result in inflationary pressures. There is new currency yes but it will not improve export performance because that is what the country really needs now.
"There is no economic change that is going to result from the currency switch." On Monday, thousands thronged banks and supermarkets in a last-minute rush to off-load their old banknotes Gono said would become garden manure after the midnight deadline.
Chaos prevailed on Tuesday as traders and shopowners battled to provide change because of a widespread shortage of low-value banknotes. - AFP
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