The Herald (Harare)

1 August 2006

Zimbabwe: Gono Slashes Zeros

Harare — RESERVE Bank of Zimbabwe (RBZ) Governor Dr Gideon Gono has slashed the country's currency by three zeros with immediate effect as part of measures to fight inflation, corruption, speculation and the indiscipline that has gripped the economy.

Presenting his Mid-Term Monetary Policy Statement in Harare yesterday, Dr Gono gave depositors a 21-day deadline to change their money after which the old bearer cheques will cease to be legal tender.

Dr Gono, who was in an uncompromising mood, spoke passionately about the vices that have affected initiatives to revive the economy, stressing that the removal of the zeros would go a long way in restoring sanity.

A new set of 13 bearer cheques ranging from one cent to $100 000 are now in circulation.

This is being done under the theme "Sunrise - A new beginning for Zimbabwe".

The currency reform, largely meant to introduce stability and convenience when transacting, will also make life difficult for illegal foreign currency dealers and speculators with trillions of dollars stashed in their homes.

At least $35 trillion is in the hands of speculators in Zimbabwe and outside the borders.

Holders of the old bearer cheques have 21 days within which they are expected to have deposited them with banks.

However, a huge chunk of the funds outside the official system, particularly that which is outside Zimbabwe, could turn into value-less paper when the deadline expires.

"Thus, the 21 days of change-over, are the beginning of far-reaching transformations for our economy and the beginning of trouble for economic saboteurs who have caused havoc to this economy through their speculative and cash hoarding tendencies," said Dr Gono, much to the applause of hundreds of delegates who attended the presentation.

Strict conditions will apply during the change-over period.

Deposits that exceeded $100 million for individuals and $5 billion for corporates will require proof of source of funds and a Zimra clearance certification for tax payment for a transaction underpinning the cash.

Where holders cannot prove legitimate sources of funds, the cash will be deposited into Anti-Money Laundering Zero Coupon Bonds (AMOLAZEBO), with a minimum tenor of two years.

The owner of the cash will hold the bonds pending investigations and clearance with Zimra, after which they will then be redeemed at face value.

However, those who prove their funds to be legitimate after they are locked up in the bonds, will receive interest at the prevailing Treasury Bill rates.

Dr Gono said no cash exceeding the stipulated $5 million will be allowed into the country during the conversion period. Those caught with excess will be prosecuted for breaching the Exchange Control Regulations and Anti-Money Laundering Laws for exporting the local currency in the first place.

On conversion from the old to the new bearer cheques, the holder will only be allowed to withdraw $100 000 new bearer cheques for individuals and $750 000 for companies.

Yesterday, the central bank launched a massive campaign to educate Zimbabweans on the new bearer cheques with teams having been deployed to the country's 60 districts.

Dr Gono said in line with the new measures, it was important that all stakeholders rebalance their valuations, including prices, incomes, contract values, asset prices among other monetary measures to reflect the changes.

He urged Senators and Members of the House of Assembly to play leading roles in educating their respective constituencies on the new bearer's cheques.

The slashing of the zeros constituted phase one of the currency reform programme.

A new currency would be introduced in the next phase to replace the bearer cheques.

This would be done without prior warning.

"We, therefore, strongly warn households, individuals and corporates to remain very vigilant in their bearer-cheque holdings, as the second phase of the currency reforms, that is, the actual removal of bearer cheques and replacement with a new Zimbabwean currency, will not be pre-announced, but will be implemented, with an even shorter change-over period of not more than seven days from the date of announcement," said Dr Gono.

RBZ officials had been sent to Turkey and Mozambique to learn from the two countries' experiences.

In his presentation yesterday, Dr Gono said the economy had in the past six months faced immense challenges such as high inflation, foreign currency constraints, rising unemployment, company closures and declining productivity among others.

However, corruption stood out as a major challenge requiring concerted efforts by all stakeholders to eradicate.

Dr Gono stressed that the fight against corruption, indiscipline and speculative behaviour would not be limited by the political, economic or social status of perpetrators.

The days were numbered for operators of "small reserve banks" in homes, illegal foreign currency dealers, smugglers of precious metals, those who diverted free-funds destined for Zimbabwe and those who diverted inputs into grey markets, among others.

The central bank, with assistance from the Ministry of Home Affairs, the Zimbabwe Revenue Authority and other relevant arms of Government, would descend heavily on such.

"Over the past 32 months, the turnaround efforts have come face to face with the hazards of the three vices of indiscipline, corruption and speculation, which have weighed us down and continue to impose an intolerable burden on the people of Zimbabwe and the economy in general," said Dr Gono.

These had outpaced targeted sanctions by the West as the major causes of economic difficulties that Zimbabwe was presently experiencing.

President Mugabe also spoke strongly against corruption when he opened the Second Session of the Sixth Parliament of Zimbabwe on Tuesday last week, saying initiatives had already begun to strengthen laws dealing with graft.

Inflation, however, remained the number one enemy but Dr Gono remained optimistic it would subside to two-digit levels by 2008.

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