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Army may go unpaid as sanctions dry up supply of paper for Zimbabwe banknotes
Chris McGreal, The Guardian (UK)
July 24, 2008

http://www.guardian.co.uk/world/2008/jul/24/zimbabwe

The Zimbabwean government is struggling to find enough cash to pay its workers, and more importantly the military, after it was forced to cut back on printing money because sanctions have severed its supply of banknote paper from Europe. Officials involved in the printing say the regime fears the presses could be shut down altogether if further political pressure causes the withdrawal of software licences used to design and print notes. Paper money is already in short supply because the state-run Fidelity Printers & Refiners in the capital, Harare, cannot keep up with demand created by the hyperinflation and rapid devaluation that causes notes to lose almost their entire value within weeks of being issued.

The problems became acute after the Bavarian firm that supplied the watermarked banknote paper - Giesecke & Devrient, which printed worthless cash for the Weimar Republic in the 1920s and supplied Rhodesia's white minority regime with currency - cut off deliveries last month under pressure from Berlin. Zimbabwe is looking to Malaysia as an alternative source of paper but the government now fears the licence for the specialist software supplied by another European company will be withdrawn as part of the boycott of Robert Mugabe's regime. The software is supplied by Jura JSP, an Austro-Hungarian company specialising in security printing. A source inside Fidelity Printers said the software issue had created an air of panic. "It's a major problem. They are very concerned that the licence will be withdrawn or not renewed. They are trying to find ways around it, looking at the software, but it's very technical. They are in a panic because without the software
they can't print anything," he said.

On Monday, the central bank issued a Z$100bn note, the highest denomination to date but worth 7p, printed on what remains of stocks of the German paper. The source said the firm had been told new supplies of paper were coming from Malaysia but, for now, it was unable to meet the demand for cash created by the hyperinflation, estimated at 40,000,000%. Fidelity's presses, which had been running 24 hours a day for many months, are now rarely started up. The firm has also had problems maintaining the presses because it is unable to obtain spare parts. The cash shortage is contributing to the rapidly deepening economic crisis and further threatening Mugabe's regime. The government needs a fresh injection of cash soon to pay its workers, from teachers and nurses to the police. It also needs to ensure money reaches the army.

Zimbabweans are limited to withdrawing just $100bn a day from their bank accounts, less than half the cost of a loaf of bread, although the government has just increased the allowance to Z$1.5tn a day for those in the military. The cash is delivered to the barracks by the banks to save soldiers standing in line for hours. Yesterday, Zimbabwe's trades union confederation wrote to the central bank governor, Gideon Gono, asking him to remove the daily limit on withdrawals, describing it as a "joke". "As you may be aware, transport alone, costs around Z$150bn, on average. How then do the monetary authorities expert an ordinary employee to report for duty and go back home when he or she is allowed to only withdraw a maximum amount of Z$100bn?" the unions said. "This employee is also expected to make available to his family bus fare for his or her school-going children, funds for daily expenditure. It has also come to our attention that most employees are now
spending their productive time queuing for cash at the banks."

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