RBZ To Slash 6 Zeros

THE Reserve Bank of Zimbabwe (RBZ) is likely to slash at least six zeros from the local currency as it grapples to fight inflation in its monetary policy presentation expected next week.

 

Information to hand suggests that government was planning to slash six zeros from the local currency to facilitate transactions in the purchase of goods and services. If this development continues as planned, it will be contrary to what Reserve Bank governor stated last month.

The central bank chief said he would consider removing the zeros in September as a cosmetic response to runaway inflation that has relegated all business transactions to trillions.

Sources said government had been toying with the idea of dropping zeros from the currency but were still working on how many zeros to remove because of the hyperinflation.

Bankers who spoke to businessdigest this week said large transactions were causing computer accounting systems to fail to transact.

Accurate financial information had been compromised due to large transaction values which most accounting systems were not able to capture.

The accounting organisation said companies, especially banks, did not have the foreign currency to acquire new software to cater for the number of zeros.

Most bank applications in Zimbabwe cannot support a $100 000 000 000 (12 digits) figure. Almost all software fails at $1 trillion that has 15 digits.

This would be the second time the bank will be removing zeros after deleting three zeros in August 2006.

The accounting body said dropping the three digits would ensure that the existing software remains in use.

The proposal means that government will strike off three zeros from the local currency to introduce a kilo-dollar.

Economists say while this would ease the burden of carrying large sums of money and conserve the current accounting systems which are under stress, it was a short-term measure that indicated that government had not only lost the war against inflation, but was now preparing for further increases.

They said the decision would not address the key issue of inflation and lack of foreign currency battering the Zimbabwean dollar.

The analysts said removing zeros would not suffice for as long as inflation remained as high as 9 030 000%, and set to continue heading north in light of government’s failure to cut down on its borrowing and money-printing activities.

A commercial bank economist said “knocking off the zeros will just be another short-term expedient. Inflation is going to get higher and we will need to go back again and knock off more zeros”.

The move would make life easier but government was only dealing with the symptoms of inflation and not the problem such as money-printing, declining commercial agriculture and curbing corruption — all of which are inflation drivers.

Some banks such as Kingdom and ZABG have slashed zeros to speed up transactions and easy balancing.

According to one bank employee, bank clients were being forced to open more than one account to process transactions which involved large sums of money.

Tich Kandanhamo, marketing manager at Kingdom however dismissed claims that they had removed some zeros insisting that their system can still take up to a quadrillion.

“The systems that we are using are made in the first world and they don’t have quadrillions, they use millions and sometimes billions,” Kandanhamo said.

By Jeslyn Dendere

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