Gono's reforms bring chaos in Zimbabwe

Gono's reforms bring chaos in Zimbabwe

• Cross: Complete pandemonium

• Mutambara: Gono's policy unsound and ineffective

• Highlights of Gono's monetary policy speech

• Gono devalues dollar, drops zeros from currency

• Gono evangelises about 'turn-around'

• Gono policy review to tackle price hikes

• Mugabe bullish on Zim economy

• Zim inflation slows to 1 184%

• Gono puts faith in economic recovery

• Tadios Chisango: inflation and the individual

• Zimbabwe's inflation breaches 1000%

• Gono: Zimbabwe 's inflation to peak at 800%

• Patrick Mlambo: A 100 reasons why Gono should resign

• Gono fighting a losing battle

• Gono, the Zimbabwean Napoleon

• Patrick Mlambo: The small minds in charge of our economy

• Chido Makunike: Overcoming the 'Messiah Complex'

By Staff Reporters

ZIMBABWE was plunged into complete pandemonium Tuesday, a day after Reserve Bank governor Gideon Gono rolled out new financial measures in response to the country's record inflation.

Gono devalued Zimbabwe's currency by 60 percent and rolled out an ambitious plan to slash three zeros from the currency.

New bank notes were released and will trade for the next three weeks alongside the existing bearer cheques which are being phased out on August 21.

The redenomination of old notes, carried out more simultaneously with the introduction of a new array of 13 bank notes ranging from one cent to Z$100,000, closely following a major devaluation, left consumers, businesses and bankers alike in confusion.

Economists downplayed the benefit of the currency redenomination, saying it would merely make life a bit easier for consumers overburdened with banknotes.

There was widespread criticism of the RBZ for failing to plan and consult widely on the new measures. Some banks closed down as Zimbabweans hurried to trade the old currency.

Businessman and opposition politician Eddie Cross told of scenes of "complete pandemonium".

He said: "It is clear there was very little consultation and planning for this huge exercise. Major firms closed for the day to try and sort themselves out before reopening. Others refused to accept cheques and the "old currency" which technically now is illegal tender. Others simply continued trading as if nothing had happened.

"Everywhere the business community was trying to sort out what to do - close
their accounts, take stock, get balances from the bank and then reopen with
a new set of accounts and data on their computers."

Automatic teller machines were shut down, further frustrating consumers.

Reserve Bank Governor Gideon Gono and other central bank officials visited banks in the capital to answer questions about the transition and bolster confidence in the operation, which Gono said Monday would be completed within 21 days.

Police established roadblocks on thoroughfares leading into Harare city center, aiming to intercept and seize hoards of black market cash.

Individuals must percent receipts or other transactional documentation for sums presented for conversion in excess of Z$100 million (US$400 at the new official exchange rate of $250,000 per U.S. dollar), while companies must account for amounts over Z$5 billion (US$20,000).

Police were also deployed to the border town of Beitbridge which is the gateway to neighbouring South Africa following reports that people were crossing the border with what Gono has described as the "missing trillions".

Gono says of the $43 trillion circulating in the economy, only $15 trillion can be accounted for in the formal market. Gono believes the "missing trillions" are financing the thriving parallel market which appeared dazed after the new measures.

Several money transfer dealers in the United Kingdom which has the largest share of forex transfers to Zimbabwe suspended transfers temporarily. One dealer issued out new rates of 105, 000 to £1 after readjusting to the redenominated currency. Previously, that would have been $105,000,000 to £1.

Opposition leaders dismissed Gono's initiatives -- pointing to a political crisis which they say will undermine any attempts to revive the economy.

Writing on New Zimbabwe.com (read article), Arthur Mutambara, leader of a faction of the opposition MDC said: "The statement addressed symptoms and not causes of the Zimbabwean economic crisis. The macro-economic fundamentals were essentially not addressed. In addition, the remedies offered were neither long term nor sustainable.

"The Zimbabwean economic meltdown is rooted in a crisis of political governance and legitimacy."

The Gono monetary conversion was merely "tinkering with some symptoms" of a deep economic crisis featuring annual consumer inflation of close to 1,200%, he said.

Tapiwa Mashakada, finance spokesman of the MDC faction led by founding president Morgan Tsvangirai said the public was given insufficient prior notice of the currency overhaul, which he called a "back-door" way of disguising the sharp devaluation.

Cross said: "One immediate casualty -- the parallel market, has gone crazy, the dollar is trading at 80 000 to one on the Rand, 750 000 to one on the US dollar and over a million to the pound sterling. It is still moving and goodness knows where it will end. The slashing of interest rates will force surplus money into the stock market and we can also expect equities to go into the stratosphere."

Despite the gloom, some enterprising Zimbabweans turned Gono's financial measures into jokes t try and lift themselves.

The independent SW Radio Africa which broadcasts from London said Gideon Gono now had a Chinese name after slashing zeros from his name to "Giden Gen".

One joke sent around by mobile phone in Zimbabwe suggested Gono had told President Robert Mugabe of his strategy to slash zeros on the currency, to which Mugabe is said to have replied: "Go ahead, as long as you don't slash me from power." -- Additional reporting VOA
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