Posted on 11/17/2007 5:51:10 PM PST by DogByte6RER
$1 Million Note On the Way As Cash Crisis Worsens
Zimbabwe Independent (Harare)
NEWS
16 November 2007
By Paul Nyakazeya
CASH shortages worsened this week amid speculation that the Reserve Bank of Zimbabwe was working on plans to introduce higher denominations of bearers' cheques.
Business digest understands that the central bank is finalising the introduction of $500 000 and $1 million notes. The new bearer's cheque notes are likely to be introduced early next month.
The denominations below $10 000 will be scrapped, sources said.
"From the discussions and preparation we have had so far I would say the new bearer's notes will come mid-December," said a central bank official who is part of the team working on the introduction of the new denominations.
RBZ governor Gideon Gono is expected to present his monetary policy early next month. In that policy, sources say, Gono will give an indication of when a new currency will come but will introduce higher denominations of bearers' cheques as an interim measure before the launch of Sunrise Two.
Two weeks ago Gono said plans for a new currency had been shelved but the market remains sceptical about the real motive of that announcement.
The central bank introduced a $200 000 bearer's cheque note three months ago but its value in both real terms and convenience has been overtaken by events on the inflation front.
Inflation surged to 14 840,5% for October, increasing 6 848,5 percentage points on the September figure 7 892,5%.
As inflation continues to gallop the demand for cash has also increased.
For instance a litre of petrol that cost $180 000 three months ago is now going for $1,3 million.
The parallel market has also put pressure on the frail Zimbabwe dollar. The United States dollar which was going for $50 000 four months ago is now pegged at about $1,3 million.
This demand for cash comes as the central bank continues to limit cash withdrawals for individuals and corporates. Corporates are allowed to withdraw only $40 million while individuals can only get $20 million a day which is barely enough to buy 20 litres of fuel on the parallel market.
Central bank sources said the plan was for the new denominations to coincide with the festive season which is normally characterised by high cash demands.
Most banks had run out of cash by mid-afternoon yesterday.
Genesis Bank group economist, Brains Muchemwa, said it was surprising that despite the market having excess liquidity cash was not available in banks.
"One would not expect banks to have problems in funding their cash requirements with such excess liquidity," Muchemwa said. "The most probable explanation could be that the Reserve Bank might be preparing to launch Sunrise Two as it promised in October, hence reduced need to print too many of the old bearer cheques that would need to be phased out in a month or so."
Zimbabwe Allied Banking Group economist David Mupamhadzi said it was an indication of the value that the Zimbabwean dollar has lost over the past few months.
"Due to the current cash shortages that we are experiencing coupled with the continuous increase in prices, the demand for money will continue to increase, and a number of agents will prefer to keep their money out of the formal system," he said.
Mupamhadzi said the situation had been worsened by the current shortages of basic goods and services, which forced people to carry cash. Most business are now demanding cash payments. In any case the black market does not deal with bank transfers, cheques or plastic money.
ZB Financial Holdings group economist, Best Doroh, said the root problem was inflation which meant that the demand for cash for transaction purposes was now high.
Kingdom Financial Holdings economist, Patrick Saziwa, said the current cash shortages were caused by speculation as a lot of money was outside the banking system.
"The Reserve Bank was not printing enough cash to support the money that it is dishing out
in the form of the Basic Commodities Supply Side Intervention Facility and other cheap financing systems leading to a cash imbalance," Saziwa.
Mugabe's Marxist "utopia" has guaranteed one thing...there will be lots and lots of "millionaires" in Zimbabwe now. That's because they will all be equally poor.
Bring back the $100 and smaller denomination bills. Print on rice paper with edible ink. That way they'll always have some value, even if it's nutritional value...
It will be the only country in the world where everyone is a millionaire and the masses live in abject poverty.
“Mugabe’s Marxist “utopia” has guaranteed one thing...there will be lots and lots of “millionaires” in Zimbabwe now. That’s because they will all be equally poor”
We all knew this would happen. Mugabe will disappear with millions of USA dollars.
Carter did a great deal to support the African Socialist regimes, back in the day.
Hard to imagine a form of government that has failed so utterly and completely as the Socialist/Communists, in Africa and nearly everywhere else.
“Print on rice paper with edible ink. That way they’ll always have some value, even if it’s nutritional value...”
Chocolate covered??
Hopefully, they are edible.
There was a time when two US Dollars were required to by one Rhodesia Dollar. Fortunately Jimmy Carter fixed that problem.
Except for those members of government who actually have access to the foreign exchange, who are, like always, cleaning up on exchange rates, becoming dollar millionaires. By the by, internet access now runs 14 billion Zimbabwe dollars a month.
africawinsagain...
What do you do, sell a kidney to send e-mail?
That’s a neat little design for a roll of toilet paper :-)
now that they are all millionaires maybe they will give something back and help the poor people
I’ll say it again: Zimbabwe’s future is revolution.
Biggest banknote ever printed was Hungarys’..from Richard Daughty of the Mogambo Guru-The Daily Reckoning..excerpt...
the all-time world record was set when “Hungary went through two hyperinflationary periods. From 1922 and 1924 the inflation in Hungary reached 98%. This seems quite timid when compared to the inflation rate of 41.9 quintillion percent reached in mid-1946 recorded as being the worst in modern history. At this rate prices doubled every 15 hours. By July 1946, the 1931 gold pengo is worth 130 trillion paper pengos.”
As an interesting aside to this, “The Hungarian National Bank has the dubious honour of circulating the largest denomination banknote - that being the 100 quintillion pengo.”
How much is a quintillion? Less than a zillion! Hahaha! Okay, seriously, in the United States and France, it’s a 1 followed by 18 zeroes, while in Great Britain and Germany, a quintillion is the number 1 followed by 30 zeroes. Either way, it’s a lot. And less than a zillion! Hahaha!
P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.
Editor’s Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
Thanks for the chuckle.
I agree with another poster regarding revolution is in Zimbabwe’s future.
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