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Not so happy New Year for Zim
02/01/2008 19:06 - (SA)
Harare - Zimbabwe's banknote shortage spilled into the New Year with desperate shoppers flocking to banks as most businesses re-opened on Wednesday.
The southern African country is in the grips of a severe economic crisis, blamed on President Robert Mugabe's policies and marked by the highest inflation rate in the world, at nearly 8 000%.
Banknotes are just the latest addition to a long list of basics in short supply. The country has grappled with scarcity of food, fuel, foreign currency and electricity for years.
Central bank Governor Gideon Gono blames the cash crisis on black market trade, especially in foreign currency.
On Monday, Gono said the economy had Z$100trillion ($3.33bn at the official exchange rate but about $20m on the black market) in circulation after the central bank injected an additional Z$33trillion in a bid to ease the cash crisis.
The central bank also reversed its decision to phase out the Z$200 000 note, which Gono says was mostly siphoned out of the banking system by black market foreign currency dealers.
But, the move seemed to fail to ease the cash crisis as banks struggled to cope with long queues.
?No improvement?
"There is no improvement, contrary to assurances that this problem would go away soon," said Patrick Shereni, adding he had been waiting for close to four hours to withdraw some cash.
Economic analysts have said the banknote crisis could only be resolved through sound economic policies, not piecemeal measures such as printing more notes.
"Introducing and printing more higher-value notes will always fall short of resolving the issue," Best Doroh, a senior economist at ZB Financial Holdings, told Reuters.
"What's required are policies that ensure growth of the formal economy, as opposed to the grey one, and to reduce inflation."
Gono admitted on Monday that the banknote shortage was a sign of an economy in trouble.
"The cash situation should not be viewed as a money-printing exercise," Gono said
"When you see cash shortages, it is merely the end result of serious misalignments that need to be addressed in the economy."
Critics blame the economic crisis on Mugabe's controversial policies, such as the seizure of white-held farms to resettle landless blacks often lacking in skills and financial resources.
Zimbabwe's economic crisis has coincided with the near-destruction of its once vibrant commercial agriculture sector.
Mugabe, 83 and in power since independence from Britain in 1980, denies ruining one of Africa's promising economies and says it has been sabotaged by western nations opposed to his land reforms.
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