Gono pumps staggering Z$80 trillion into economy to ease cash crunch

HARARE – Zimbabwe's central bank injected $80 trillion in new bank notes into the economy in a bid to end cash shortages that have seen hordes besieging banks amid a deepening economic crisis. In another twist Central Bank Governor dismissed the entire board of a local bank, CFX Holdings after it was leaked that the bank had off-loaded $260 billion of the new currency to buy foreign exchange one day before the new notes were legal tender.

CFX Board of directors dismissed by Gono includes, Chairman James Strathern Brown, Pearson Chitando, Paul Alichindamba, Moses Tonderayi Chingwena, Onesimo Jacob Mukumba, Admore Kandlela, Innocent Chagonda, Brian Hoffman, Eliot Shadaya, Tladi Ramushu and Patricia Tsitsi Ndoro.

Once described as a model economy and a regional breadbasket, Zimbabwe’s economy has collapsed over the past decade and there are now shortages of basic foodstuffs like sugar and cooking oil.

Zimbabwe has the highest inflation rate in the world, officially above 231 million percent but believed to be significantly higher, and bank notes have joined a long list of shortages in the country.

The crisis-hit southern African country is also battling a cholera epidemic that has killed at least 565 people, according to the United Nations.

Reserve Bank of Zimbabwe (RBZ) Governor Gideon Gono told reporters the central bank would continue to take measures to meet the high demand for cash.

"Banking institutions were issued with a total of Z$80 trillion to prepare their systems for the increased cash withdrawal limits beginning on the 4th of December, through the issuance of new notes," Gono said.

The central bank introduced new higher value notes in Z$10 million, Z$50 million and Z$100 million denominations and raised cash withdrawal limits five-fold to Z$500,000 million per week from December12, and Z$10 billion per month with effect from December19.

Workers would be allowed to withdraw their entire salaries upon presentation of a pay cheque, from January 12 2009, Gono said.

He said the new measures had been agreed to with the country’s main labour federation, the Zimbabwe Congress of Trade Unions (ZCTU), whose leaders Gono met on Wednesday after they called for nationwide protests over the bank note shortages.

Tensions rose as groups of unarmed soldiers this week clashed with police after going on a rampage, seizing cash from foreign currency traders and looting shops.

Critics say President Robert Mugabe’s policies, such as the seizure of white-owned farms to resettle landless blacks, have ruine the economy. He blames Western sanctions for the crisis.

Analysts say a power-sharing pact signed by Mugabe and bitter opposition rival Morgan Tsvangirai presents the best hope to rescue the economy, but the agreement is threatened by a raging dispute over control of key ministries.