Wednesday, November 12, 2008

Zimbabwe attempts to alleviate inflation crisis

From Omnibus - 12 November 2008
Matt Webber
Issue date: 11/12/08 Section: News
The Zimbabwe government is taking steps to solve the devastating inflation problem that has capsized the country's economy.
Recently, there have been two attempts to revalue the Zimbabwe dollar, though neither attempt was significantly effective.
Last week, the government declared that it will introduce Z$100,000, Z$500,000 and Z$1 million in an attempt to help citizens make basic purchases.
Zimbabwe has also started allowing currencies from other countries to be used instead of the virtually worthless Zimbabwe dollar.
"In the measures under way, the Reserve Bank [of Zimbabwe] plans to introduce a number of new, higher denominations; review the cash withdrawal limits, as well as commence aggressive campaigns for increased usage of alternative means of payment," said bank governor Gideon Gono.
The inflation rate is 230 million percent, the highest in the world, according to CNN.
The value of the Zimbabwe dollar makes the cost of one loaf of bread about $1.6 trillion.
The new and larger currency will make it possible to make purchases that were impossible with the old and smaller currency.
This new plan is projected to work better than previous efforts to repair the once strong Zimbabwean economy.
The revaluing attempts in the last two months removed the excessive zeros from the prices.
In mid-October, 10 zeros were removed in currency, changing $10 billion to $1.
The attempts did not work because marketers were wary of the change and would not lower their prices by billions of dollars simply because of a government decree.
The police force under President Mugabe was sent to markets and used intimidation and violence to force marketers to lower their prices.
The lower prices that were required of marketers led many to go out of business, driving prices of goods even higher.
The ambiguity of the value of the dollar has also led to a fairly dominant black market in Zimbabwe, which cannot be taxed by the unstable government. The final aspect of the problems in Zimbabwe is the divided government.
President Mugabe has blamed other countries, poor management of Zimbabwe businesses, and fleeing Zimbabweans for the economic problems in the country.
Mugabe has been accused by opposing party leader Morgan Tsvangirai of using police intimidation to sway polls.

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