Currency crash prompts dramatic move by Gono
IOL
October 03 2008 at 01:35PM
Harare - Confusion struck Zimbabwe's financial system on Friday after
the central bank stopped electronic transfers, following the currency's
crash to a new record low.
State radio quoted Reserve Bank of Zimbabwe Governor Gideon Gono as
saying that electronic transfers had been suspended because they were
"being used for illicit foreign exchange deals," and by businesses "to
overprice their goods and services".
"We have no option but to take this drastic measure in order to
maintain sanity in the financial system," he said.
A chronic shortage of cash in Zimbabwean currency means people have
virtually abandoned changing the near worthless money for foreign
currency on the street as had been the norm. Recently, most have been
getting hard currency through electronic transfers.
Gono's announcement came as the exchange rate for electronic transfers
on Thursday plunged to one million Zimbabwe dollars for one US dollar,
just two months after the central bank slashed 10 zeros off the
currency on August 1.
Despite the drastic revaluation, the currency has continued to
haemorrhage. Its current value is one ten-thousandth of that at the
beginning of August.
Gono said people would have to use cheques and debit cards to pay for
goods, although debit cards are usable in only a few dozen supermarkets
nationwide.
"There's a lot of confusion," said a business executive who asked not
to be named. "The banks are now saying that you can't do internal
transfers within the same bank, and even Internet banking is banned.
"Cheques are a real hassle, it takes five days to clear, and in this
crazy economic climate you can lose a huge amount of money in that
time."
Zimbabwe's economic decline has reached a break-neck pace in recent
months. Inflation is estimated at 40-million percent, among the top
five levels in history worldwide.
The printing of cash by the central bank to meet President Robert
Mugabe's regime's voracious appetite for spending and his disastrous
transfer of productive white-owned farms to inexperienced farmers are
seen as the chief reasons for the country's nosedive.
On Wednesday, a cup of coffee at the capital's Holiday Inn hotel cost
1.5 million Zimbabwe dollars. A police constable is paid 10 000
Zimbabwe dollars a month.
On Monday, in a bid to end mammoth queues outside banks for cash, Gono
increased the maximum ATM withdrawal amount 20-fold and introduced new
bank notes. - Sapa-dpa
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