Complete Pandemonium

Today – the day after Gideon Gono, the Governor of the Reserve Bank, announced the reduction of the numerical values of the Zimbabwe dollar by three digits, has been characterized by chaos and confusion.

Barclays Bank and Beverly closed their doors; Standard Bank traded but advised their clients to write Cheques using the new denominations with the endorsement “Revalued” on the cheque. Zimbank simply traded as normal – refusing to issue the new currency. 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. How to work the new numbers with Cheques still coming in and both types of currency in circulation?

The new notes have not put in an appearance yet but it is clear that when they do this will create yet more confusion – they are in the following denominations (all paper “bearer bonds”: -

1 cent, 5 cents, 10 cents, 50 cents, 1 dollar, 5 dollars, 10 dollars etc. up to 100 000 dollars. The first note is worth 10 “old” dollars, the last is worth 100 million “old” dollars. The cost of printing the smaller notes, which will be virtually worthless, must have been at least 50 new dollars per note (50 000 “old” dollars) so the loss on this operation must run to many billions of “old” dollars. A complete waste of money as the only unit that makes any sense is the 1 dollar note and even then this is so small as to be a nuisance. The 100 000 note will attract the forgers big time!

It is clear there was very little consultation and planning for this huge exercise. I am told the Police have desended on Beitbridge in force to stop people bringing the missing trillions back into the country! I feel sorry for all who must now go through the hoop at the border posts. What a waste of time and energy.

One immediate casualty – the parallel market has gone crazy, the dollar is trading at 80 000 to 1 on the Rand, 750 000 to 1 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 equitiesd to go into the stratosphere. Fuel is trading in a confused market at 600 000 “old” dollars today.

Eddie Cross
1st August 2006