New currency for Zim
The measures became effective on Friday.
Gono lopped off 10 zeros from the currency, meaning $10 billion is now equivalent to $1, and announced the reintroduction of old coins, which will increase the amount of money in circulation.
Presenting his 2008 mid-term monetary policy statement in Harare yesterday, the central bank chief raised the daily cash limit to $2 trillion or $200 (in the new currency) from $100 billion previously.
The new and old currency will co-circulate with the existing bearer cheques and special agro cheques, which expire on December 31.
RBZ introduced a new 25 cent coin and reintroduced $5, $2, $1, 50 cent, 20 cent and 10 cent coins.
“Go back and look for those coins, we never demonetised them,” said Gono, who also announced the introduction of a $500 note, which would be the highest denomination.
However, with a maximum cash payout of $200 (new currency) from banks, it is not clear whether the $500 was scheduled for release into circulation at the end of last week although old bearer cheques would continue to be valid until the end of the eyar, although with a value of 1/10 billionth of their face value..
“We once again wish to call upon stakeholders to exercise restraint in their demand for cash and in how prices are set in the goods and services markets,” said the governor.
“The current reform efforts will, therefore, work to sustain permanency of the new currency being rolled out, along with the conveniences it will bring.”
To fend off the threat of a wholesale loss of confidence among depositors and investors, it had become necessary to increase withdrawal limits and lop off additional zeros.
The proliferation of zeros had made calculations difficult as the banking system could not read numbers in excess of 10 billion.
Between May and September 2003, the country experienced critical cash shortages that saw customers queueing for hours to withdraw their savings.
In August 2006, Gono slashed three zeros from the old currency and issued a new family of bearer cheques.
Yesterday, Gono reinforced the need to continue funding agriculture, as the cornerstone for economic development.
He said the fourth phase of the Agricultural Mechanisation Programme would be launched soon, so that by 2010 between 70 percent and 80 percent of farmers would be fully mechanised.
There was also no need for political bickering, the governor said, as this destabilised efforts towards economic recovery. Gono spoke on the need for political unity and speaking against sanctions with one voice.
Gono said the central bank would continue assisting fertiliser companies with the aim of increasing production.
On Monday, the central bank advanced US$3 million to fertilizer manufacturers. An additional US$3 million would be allocated to the industry next week.
“This will enable them to put their industry to full production and enable them to meet the fertilizer requirements that we need,” he said.
The central bank promised to release at least US$10 million to the industry on a monthly basis to ensure adequate supplies. Fertilizer firms need as much capital every month to operate at full throttle.
Some 1 250 tonnes of fertilizer are expected every week from the US$10 million advanced to fertilizer producers early this month. The shortage of inputs, including fertilizers, has been blamed for low agriculture production over the years.
Gono kept interest rates unchanged at 8 500 percent and 9 500 percent for secured and unsecured borrowing respectively, a key tool he has used to fight inflation over the years.
But inflation has not come down. It has instead risen to a record 2,2 million percent at the end of June. Gono said the only answer to curbing inflation was increased production, especially in agriculture.
It is thus his hope that agriculture funding will be prioritised going into the future. Gono proposed “a moratorium on all incomes and prices for a minimum period of six months” to curb inflation growth.
President Mugabe has invoked presidential temporary powers meant to give effect to the currency reform measures announced by the RBZ yesterday.
The regulations, which were published in a statutory instrument in an Extraordinary Government Gazette yesterday, give effect to the currency reforms which would see the money being revalued and lopping off 10 zeroes that had become cumbersome in cash transactions.
The regulations are set to take effect from tomorrow when new notes and coins come into circulation.
The regulations also spell out the common features found on the new currency.
It is also stipulated in the regulations that for all accounting, taxation and other purposes requiring financial results for a period of 12 months, the final balances would be expressed in terms of the new currency.
“No financial institution shall impose any fee, commission or other charge whatsoever in respect of the conversion from the old currency system to the new in terms of Subsection (9) or (10),” read the regulations.
A financial institution caught contravening the section would be liable to a fine of up to or exceeding Level 14, the highest level available.
Traders are required by the regulations to adjust, reconfigure or redesign where necessary, replacement of its computer software, hardware or networks.
An institution that fails to comply with the above regulations would be liable to a fine equivalent to or exceeding Level 14.
Traders or shops are also required to display their prices in both the old and new currency. — The Herald.