Zimbabwe's central bank introduces 10 million Zimbabwe dollar note

Jan 17, 2008, 15:06 GMT

Johannesburg/Harare - President Robert Mugabe's government, stricken by chronic hyperinflation, announced Thursday it was to introduce a 10 million Zimbabwe dollar note.

Economists said they believed it was the highest denomination of any currency in the world.

Central bank governor Gideon Gono was quoted on state radio as saying that the bank would begin releasing a set of three new notes - 1 million, 5 million and 10 million - on Friday.

The issue of new notes follows nearly three months of banking chaos as cash dried up and queues, sometimes hundreds of metres long, became a permanent feature outside commercial banks.

Zimbabwe is in its 10th year of economic crisis, marked by the world's highest rate of inflation, the fastest shrinking gross domestic product in a country not in a state of war, the most rapidly collapsing currency and unemployment of over 80 per cent. Economists blame the reckless economic policies steered by the 83-year-old Mugabe.

Economists said the disappearance of cash was a result of inflation estimated at 50,000 per cent - the government has banned publication of official figures - that forces shoppers to pay with brick-sized bundles of near-worthless notes for a few simple groceries.

A year ago, the highest denomination was 10,000 Zimbabwe dollars, then worth about 7 US dollars. The new 10 million Zimbabwe dollar note is 1,000 times last January's top note, and worth 3 US dollars. During the year there were three separate new issues of notes as inflation continued to soar.

'As monetary authorities we once again assure the nation that we are in full control of the currency situation,' Gono said Thursday.

Economists say that the hyper-inflation is a result of the government's stated policy of printing cash when it runs out of money, and price controls that have caused the supply of goods in shops to disappear, only to resurface on the black market.

The government stopped issuing banknotes in 2003 when it replaced them with temporary 'bearer cheques' stamped with an expiry date, although the bank renews their validity on expiry.

Economists say it is apparent that state economic policy is shot through with confusion and indecision. In early December, Gono announced that the introduction was 'imminent' of a new currency denominated 1,000th of the current system - 17 months after he last sliced three zeroes off the country's money.

However, the new notes failed to appear, and, without explanation, the bank brought out 250,000, 500,000 and 750,000 Zimbabwe dollar bearer cheques instead. The 750,000 Zimbabwe dollar note is barely enough to buy a copy of the state-controlled daily newspaper.

The new notes have made no impact on the queues. 'Long ago they should have produced the 10 million note,' said an economist who asked not to be named. 'This is economic policy-making on the hoof.'

About 300 people milled about the entrance of the Beverley Building Society office in Harare's Avondale suburb on Thursday morning.

'The security guard says they start queuing at 1:00 am,' said a shop owner next door. 'Only the first hundred or so manage to get cash. At 16:30, when the bank closes, they go away, but they come back the next morning again, because cash is so short they can only draw Zimbabwe dollars 5 million at a time.'