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Zimbabwe Dollar Crashes On Central Bank Plan To Issue New Notes

The Zimbabwe dollar has crashed in recent days to a new all-time low of Z$4 million to the U.S. dollar as foreign exchange dealers on the country's bustling parallel currency market react to central bank warnings that new banknotes are soon to be issued.

Although the currency often experienced steep declines, the latest drop exceeded its predecessors in steepness and magnitude with the currency depreciating several fold in less than a week fueled by hyperinflation conservatively estimated at 15,000%.

The central bank previously overhauled the national money supply in July and August 2006 when it lopped three zeros off the currency and told consumers and businesses to exchange all their old banknotes in a chaotic three-week period.

The monetary authority has already restricted the amounts that can be deposited in banks, intending to prevent speculators from swapping gains into new notes.

An informal survey found that prices of basic commodities, transport costs and other essentials of life have rise fourfold to fivefold in the past few days alone. Reflecting the astronomical prices for ordinary goods, banks have been running out of cash, and the Reserve Bank's warning that it will soon issue another currency and call in old notes is seen as a move to pull cash in circulation back into the official financial sphere.

Reserve Bank Governor Gideon Gono has warned what he describes as the informal-sector "cash barons" that a new currency will be issued any day - but economists say Gono's announcement has given impetus to the further collapse of the currency as individuals and businesses as well as speculators are rushing into hard currencies.

Economist Tony Hawkins told reporter Blessing Zulu of VOA's Studio 7 for Zimbabwe that the crisis has its roots in central bank money-printing to finance the government.

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