Zim threatens to close banks
23/01/2008 12:18  - (SA)  

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Harare - President Robert Mugabe's government had ordered banks to end a bank note shortage or risk being closed, state media reported on Wednesday.

Bank notes had joined the long list of basic commodities in short supply in the southern African country, which was grappling with an acute economic crisis blamed on Mugabe's policies.

The central bank had responded to the cash crisis by issuing higher-value notes, including a Z$10m bill (worth $333) at the official exchange rate but $2 on the black market.

Central bank Governor Gideon Gono this week said the country now had Z$170 trillion in circulation, up from Z$67 trillion when the shortages began.

He said total money in circulation would rise to Z$800 trillion by the end of the week in an attempt to keep pace with surging inflation.

Central bank may close banks

The measures did not end long queues at banks, and Gono accused banks of failing to collect bank notes from the central bank as they had tied up depositor funds in speculative illiquid assets.

The official Herald newspaper on Wednesday reported that Gono and Finance Minister Samuel Mumbengegwi met bank executives on Tuesday to order them to resolve the crisis by next week or face closure.

"...Mumbengegwi said the central bank would not hesitate to close those banks that did not want to continue operating in the industry," the Herald said.

The finance minister also said the "unending queues had now assumed a political complexion as some mischievous individuals were now using the queues to advance their hidden political agendas," the newspaper added.

Zimbabwe's economic crisis - driving inflation to almost 8 000% according to official data - had also heightened political tensions in the country over Mugabe's rule.

Apart from the bank note problem, Zimbabweans faced shortages of food, foreign currency, fuel and electricity widely blamed on Mugabe's seizure of white-held farms to resettle landless blacks, which hurt the agriculture sector.

Mugabe, 83, and in power since independence from Britain in 1980, denied running down what was once one of the continent's most promising economies and said it had been undermined by Western powers opposed to his land reforms.

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