Pictures of Zimbabweans paying for a loaf of bread with sacks full of cash may be a thing of the past as the government slashes ten zeros from the currency.
Zimbabwe’s astronomical levels of inflation, which have crippled the country’s economy and made basic goods unaffordable, will be artificially deflated when the currency is revalued next month.
Gideon Gono, governor of the central bank said today: “The Zimbabwe dollar will be redenominated by a factor of one to 10, which means we are removing ten zeros from our monetary value. Ten billion [Zimbabwean] dollars today will be reduced to one dollar effective from August 1.”
The move is unlikely to end Zimbabwe's financial woes, however, and the country’s economic nose-dive is expected to continue unabated.
Similar previous attempts to rescue Zimbabwe’s inflation levels from the stratosphere have failed. In 2006, the central bank slashed three zeros from the currency when inflation stood at a few hundred percent, already the highest rate in the world.
Inflation is now officially pegged at 2.2 million per cent a year but independent analysts estimate it to be closer to 12.5 million per cent, making it almost impossible to withdraw cash.
Mr Gono also indicated that he will raise the daily amount that Zimbabweans are allowed to take out from their bank accounts.
“I am, therefore, very confident that this coming week will bring about the much needed relief in our national payment system,” Gono said.
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 costing on average Z$150bn.
Businesses in the capital Harare have been driven into the ground by the crisis as goods are priced beyond reach of even the wealthiest. The readjustment will bring a dramatic drop in the face value of goods but will do little to alleviate the suffering for millions in the country.
United Nations agencies say failed crops and a drop of nearly 50 per cent in maize imports have left 2 million people in urgent need of help. This figure is expected to leap to 5 million people – more than half of the population - by year.
Thabo Mbeki, South African President will meet President Robert Mugabe in Harare today to discuss the crisis in Zimbabwe.
Mr Mbeki held talks with Zimbabwe’s opposition leader Morgan Tsvangirai in Pretoria yesterday. He also plans to meet Arthur Mutambara, head of a breakaway faction of the opposition Movement for Democratic Change (MDC), he said.
Talks on Zimbabwe’s political crisis broke up yesterday as negotiators flew home to resolve a deadlock over power-sharing between Mr Mugabe and his rival, Tsvangirai. But Mr Mbeki insisted discussions were still on track, despite talk of a deadlock by the MDC.
In a televised address today, Mr Mugabe insisted that negotiations with the opposition on a power-sharing government were continuing. He said that “we want to succeed”, but warned that “sometimes compromise is difficult.”