Army may go unpaid as sanctions dry up supply of paper for Zimbabwe banknotes

Munkey

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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paper but the government now fears the licence for the specialist software supplied by another European company will be withdrawn as part of the boycott of Robert Mugabe's regime.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 They are very concerned that the licence will be withdrawn or not renewed.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."

The demand for new higher denomination notes, as the value of existing ones plummeted, is reflected in the rapid increase in the number of zeros appearing on notes printed over the past two years.

In August 2006, the central bank issued a Z$5 note. On 2 May 2008, a $500m banknote appeared but was swiftly near worthless. Notes of $5bn, $25bn and $50bn notes followed a fortnight later.

The speed of the devaluation can also been seen in the watermarks. Hold a Z$750,000 note to the light and the watermark shows the paper was intended to be used for a Z$1,000 bill. The $25bn note has a Z$500 watermark.

Jura spokeswoman, Renate Kroboth, said company officials responsible for the software contract are on holiday and were not immediately available for comment.

The Guardian
 

Munkey

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The figures in this story are simply crazy. I find myself laughing as I read the article but when you consider the effect this has on normal people in Zimbabwe then it becomes a different matter.

$100Billion = 7p!

IIRC I read somewhere that inflation was at 2M%

Unfortunately Zimbabwe has become an example of a failed state. I just wonder how rich Mugabe is? I have seen this type of monetary policy before in countries such as Pakistan where governments intentionally devalue their currency and then 'buy back' when the tide turns. This time out I don't think the tide will come in, although if we all know Mugabe he may well surprise us all.
 

daveleebond

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i went their on my hols about 12 years ago to see victoria falls , it was such a nice place, shame :(
 
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