Way too many Zeros

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Zimbabwe’s economy is unravelling at such a pace that the central bank is set to slash yet more zeroes from the country’s increasingly worthless currency.

By Tom Burgis in Johannesburg and Tony Hawkins in Harare

State media on Sunday quoted Gideon Gono, the Reserve Bank of Zimbabwe governor and one of the members of the ruling elite targeted by fresh western sanctions last week, as saying he would extend a currency policy that has so far failed to stem hyperinflation.

“This time, we will make sure that those zeroes that would come knocking on the governor’s window will not return,” Mr Gono was quoted as saying on Saturday in a speech to farmers.

Independent estimates put Zimbabwe’s inflation rate well above the official 2.2m per cent, prompting the introduction last week of a 100bn Zimbabwean dollar note. Even state media reported Mr Gono’s comments “drew laughter” from his audience.

The governor is expected to chop three or six zeroes from the currency, following a three-zero cut in 2006.

Beside the inflationary zeroes haunting Mr Gono, analysts and some opposition politicians say the crumbling economy in what was once a regional bread basket is perhaps the single greatest factor that might force Robert Mugabe, president, into relaxing his grip on power.

Mr Mugabe’s negotiators have begun a fortnight of power-sharing talks in South Africa with leading members of the opposition Movement for Democratic Change, following the ageing ruler’s widely discredited victory as the sole candidate in presidential polls last month.

United Nations agencies estimate a failed crop and a shortfall of nearly 50 per cent in maize imports have left 2m people in immediate need of assistance. The figure is expected to rise to 5m people – well over half of the population – early next year.

Mr Gono also indicated he will raise the daily limit on the amount Zimbabweans are permitted to withdraw from their bank accounts.

Zimbabwean trade unions wrote an open letter to the central bank governor last week describing the current cap of Z$100bn as “a joke” with transport to and from banks alone generally costing on average Z$150bn.

As increasingly desperate Zimbabweans flout a ban on transactions in US dollars, the central bank’s difficulties have been compounded by the withdrawal of a German company that used to print its bank notes.

The government blames the economic strife on “illegal” sanctions, condemning opponents who point to violence land seizures that have contributed to a drastic fall in agricultural output.

The Financial Times

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