Zimbabwe’s world-record inflation rate of 6,592 per cent has led to shortages of commodities and mass unemployment.
Robert Mugabe, Zimbabwe’s president, has prioritised reducing inflation, with the government imposing a price freeze three months ago to try to control spiraling prices.
But the move has prompted businesses to stop stocking bread, milk and other basic consumer items.
In his address, Gono said the central bank will impose deposit thresholds during the changeover to the new currency.
“Our well considered advice … is that a fine balance should be struck between the objectives of indigenisation and the need to attract foreign investment”
Gideon Gono, Bank of Zimbabwe governor
He advised businesses and individuals to refrain from keeping large amounts of funds, or else risk losing their money due to the deposit limits imposed during the change.
Gono also announced the bank was increasing the main lending rate to 800 per cent from 650 per cent.
He predicted that inflation should decelerate in the medium term but spending before parliamentary and presidential elections in 2008 would put extra pressure on the rate of inflation.
“The threat of continued inflationary pressures remains high,” he said.
The governor expressed concern over a bill approved last week by legislators which allows Zimbabweans a majority stake in foreign-owned firms.
Opposition politicians have said that the new ruling could further destabilise the country’s economy, while foreign-owned companies in Zimbabwe are worried they could lose control of their businesses.
“As monetary authorities we fully support the noble objective of empowering the majority of the Zimbabweans through the introduction of enabling statutes that expand wider involvement for the people in the mainstream economy,” Gono said.
“Noble as this objective is, our well considered advice to legislators and the government in general is that a fine balance should be struck between the objectives of indigenisation and the need to attract foreign investment.”
As Gono presented the monetary policy, Mugabe told supporters his government would seize defiant businesses over high prices.
Mugabe says some businesses have raised prices without justification, alleging it was part of a Western plot to destabilise the country and ultimately unseat him.
“We don’t want to be chasing each other. We will have to seize the companies,” Mugabe said.