Angus Shaw, AP, July 30, 2008
Zimbabwe announced Wednesday that it is knocking 10 zeros off its hyper-inflated currency—a move that turns 10 billion dollars into one.
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.”
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 100 billion-dollar note—still not enough to buy a loaf of bread.
Gono said the new money would be launched with 500-dollar bills. He also said he was reintroducing coins, which have been obsolete for years, and told people to dig out their old ones.
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 $1 at the beginning of the month can cost $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.”
At the root, he said, is the damage to the farming sector, along with government raids on the state pension fund and foreign currency bank accounts of businesses.