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Zimbabwe Banking In Disarray After Central Bank Suspends Transfers

Attempting to arrest a precipitous slide by the Zimbabwean dollar, the country's central bank on Friday suspended domestic electronic money transfers in a bid to block unauthorized currency trading and alleged price-gouging by businesses.

Wire services quoted Reserve Bank Governor Gideon Gono as saying he took the drastic step to maintain "sanity" in the already severely strained financial system.

The central bank action compounded the difficulties facing consumers who must line up for hours to effect withdrawals of cash from banks at the maximum daily rate of Z$20,000 per customer - not even enough to buy a loaf of bread, let alone pay rent. Many Zimbabweans have become accustomed to paying larger bills through such electronic transfers.

Economists say the main reason for the scarcity of banknotes is the hyperinflation which has gripped the economy. The last official measure of inflation was given for June, when it galloped at an annual rate of 11.2 million percent. But economists inside and out of the country say hyperinflation has reached multi-billion-percent warp speed.

The move followed the collapse of the local currency in terms of the exchange rate used in electronic transfers – before transfers were banned it was changing hands at Z$700,000 to Z$800,000 700 to the U.S. dollar compared with $500,000 on Tuesday.

In street-level cash transactions exchanging greenbacks for Zimbabwean banknotes, however, the rate Friday was $Z4,500 compared with Z$3,000 Tuesday.

Economist and consultant Luxon Zembe, a former president of the Zimbabwe National Chamber of Commerce, told reporter Patience Rusere of VOA's Studio 7 for Zimbabwe that that suspending transfers was likely to do more harm than good.

Correspondent Irwin Chifera of VOA's Studio 7 for Zimbabwe reported from Harare that there was general mayhem at banks following the move.

More reports from VOA's Studio 7 for Zimbabwe...