Zimbabwe issues new banknotes

 

Zimbabwe’s official rate of inflation stands at 8,000 per cent, but independent estimates put it much higher.

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Zimbabweans queue at the banks

The International Monetary Fund (IMF) has forecast that the country’s inflation rate will hit 100,000 per cent by the end of the year.

Banks have rationed money withdrawals to Z$5m per customer, enough to buy a fast food meal, to cope with lines of people over the past few days.

The economic crisis, Zimbabwe’s worst since independence from Britain in 1980, has led to acute shortages of food, fuel and most basic goods.

Unemployment is hovering at about 80 per cent and there is little in the way of foreign investment, loans and development aid.

Temporary solution

Bronwyn Curtis, chief economist at the Arch Group, told Al Jazeera that new notes could encourage people to spend in an attempt to protect their funds.

“They can print as many notes as they want, but inflation will continue to wreak havoc” Rashid Mudala, research analyst

“What happens is [that] there is an incentive to just go out and spend your money as quickly as possible and buy real goods, which you then hoard,” she said.

“That makes the situation worse because you then have fewer goods on the market and the price goes up again. It gets worse and worse.”

Best Doroh, an economist at ZB Financial Holdings, said the banknotes, the highest of which cannot even buy a loaf of bread, were not a permanent solution.

“It’s just a temporary measure … the huge demand for cash will always be there as long as inflation remains high and there is more activity in the informal economy, as opposed to the formal sector,” Doroh said.
   
Rashid Mudala, a research analyst, said Zimbabwe’s diminished productivity and hyperinflation would stymie the measures by the central bank.

“They can print as many notes as they want, but inflation will continue to wreak havoc,” Mudala said.

“The focus should be on inflation and ensuring the productive sector runs efficiently.”

Robert Mugabe, Zimbabwe’s president, has attributed the economic crisis to Western sanctions and rejects claims that his government has mismanaged the country.