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As inflation soars, Zimbabwe short on cash
Sebastien Berger, The Telegraph (UK)
November 26, 2007

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/11/26/wzim126.xml

After running out of basic foods like bread and milk, Zimbabwe is now running out of bank notes.

The soaring inflation rate - the world's highest at 15,000 per cent - means locals are being forced to use more bank notes to buy less.

The largest denomination note, the Z$200,000 bill, is worth about eight pence and the standard unit of exchange is a packet of 100 wrapped in plastic bands.

Cash is in such short supply that ATM withdrawals have been limited to Z$10million (about £4) per person per day and huge queues form outside banks every day.

One customer in Harare had been waiting in line for six hours. Asked if there was money available or whether any would be delivered, another said: "I don't know."

Gideon Gono, the reserve bank governor, said last week that the launch of a new currency, dubbed Operation Sunrise II, was imminent.

But the last Operation Sunrise - when three zeros were knocked off prices and notes - proved a false dawn and no one expects any different this time. While the situation is a goldmine for blackmarket currency traders, it does pose a logistical problem.

Keen to remain inconspicuous, they stuff their pockets with notes, while large-scale dealers, operating from vehicles, are regularly exchanging blocks the size of bricks.

"Everybody is buying and selling money to each other," one trader said. "Most of the guys can't put their money in the banks because they are losing value - so they buy US dollars."

The government itself was driving down the Zimbabwean dollar by paying a premium on transactions just to ensure they got currency quickly, he said. Usually cash is traded at a 20 per cent premium to bank deposits. But with foreign exchange deals, the premium could reach almost 100 per cent. "The government froze the supply of cash to the banks," the trader said. It is as if Mr Mugabe, having failed to control inflation by neo-communist price controls, has converted to Thatcherite monetarism.

But the reality is more prosaic.

"They can't print it fast enough," said John Robertson, an independent economist in Harare. He suspects the presses are secretly being used for soon-to-be issued Z$500,000 and Z$1million notes.

The government was still driving up the money supply with cheap credit and the absence of goods to buy was fuelling inflation, he said.

"It's just become such an inefficient mess because of incredible shortsightedness on the part of the government," he said.

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