New currency no panacea for Zimbabwe’s economic woes

HARARE, Aug 22, 2006 (AFP) – Zimbabwe converted to a new currency Tuesday in a move aimed at stemming runaway inflation but analysts said it would do little to halt a downward spiral in the southern African country’s economy. The Reserve Bank slashed three zeros from its currency on July 31 and set a 21-day ultimatum that expired at midnight Monday for old notes to be handed over in exchange for new dollar bills.

Central bank chief Gideon Gono said the currency change would snuff out a burgeoning parallel foreign currency market and bring relief to shoppers who have had to carry bagfuls of cash on regular trips to the supermarket.

“It returns to us stability and convenience and, of course, this is just one monetary mechanism to help make commerce and everyday life more convenient,” Gono said.

But finance experts argued that the move failed to address the underlying faults in an economy saddled with the world’s highest inflation rate outside a war-zone.

“There is no way this is going to arrest the economic decline,” James Johwa, an analyst with a Harare-based economic thinktank, told AFP.

“Many issues such as the state of our relations with other countries, archaic laws which remain in place and lack of har