Zimbabwe drops 10 zeros from inflated currency

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(Agencies)
Updated: 2008-07-31 14:52

HARARE - Zimbabwe announced Wednesday that it is knocking 10 zeros off its hyper-inflated currency - a move that turns 10 billion dollars into one.

Eskom's Chief Executive Officer Jacob Maroga gestures during an interview with Reuters in central London July 29, 2008. South Africa stopped supplying electricity to its northern neighbour Zimbabwe "several months ago", Maroga told Reuters on Tuesday, saying there was no political motive behind the shift. [Agencies]

President Robert Mugabe threatened a state of emergency if businesses profiteer from the country's economic crisis, a move that could give him even more sweeping powers to punish opponents in the event that political power-sharing talks fail.

"Entrepreneurs across the board, don't drive us further," Mugabe warned in a nationally televised address after the currency announcement. "If you drive us even more, we will impose emergency measures. ... They can be tough rules."

But in a glimmer of possible rapprochement in Zimbabwe's political turmoil, opposition leader Morgan Tsvangirai revealed that he met with Mugabe last week for the first time in years and discussed the "pitfalls in any future government" that might emerge from the negotiations.

He didn't indicate their meeting produced any agreement, however.

In a conciliatory gesture, Tsvangirai told Britain's Channel 4 that his longtime rival is as "human as everyone else." However, he added the president is "in denial" about the economic problems and political violence that have swept this once prosperous southern African nation.

Central Bank Gov. Gideon Gono announced he was dropping 10 zeros from Zimbabwe's currency, effective Friday. The move comes a week after the issue of a US$100 billion note - still not enough to buy a loaf of bread.

Gono said the new money would be launched with US$500 bills. He also said he was reintroducing coins, which have been obsolete for years, and told people to dig out their old ones.

That could be a boon for Fungai Matambo, a 33-year-old vendor of airtime for cell phones who said she has kept a large milk pail full of old coins.

"I'm very happy now," she laughed. "In the old terms, I'm a multi-trillionaire!"

But, she noted, there is little to buy in the shops amid chronic shortages of food, medicine, power and water.

John Takawira, 28, who works in an Internet cafe, said the latest move would do nothing to improve life in Zimbabwe, where 80 percent of the work force in unemployed.

"The prices of goods have already started shooting up," he complained. "This is not going to make any change to my poor life."

Gono acted because the high rate of inflation was hampering the country's computer systems. Computers, electronic calculators and automated teller machines at Zimbabwe's banks cannot handle basic transactions in billions and trillions of dollars.

Inflation, the highest in the world, is officially running at 2.2 million percent in Zimbabwe but independent economists say it is closer to 12.5 million percent.

Economist John Robertson said the new bills would soon be worthless since the rate of inflation continues to skyrocket. What costs US$1 at the beginning of the month can cost US$20 by month's end, he said.

"This is attending only to the symptoms of the problem. The real problem is the scarcity of everything driving up the prices. ... The government has not only caused the scarcities but damaged our ability to fix the problem."

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