Analysts say Mugabe too broke to print money as banks run dry

By Tererai Karimakwenda
30 May 2006

Banks in Zimbabwe are reported to have run out of cash as the month comes to an end and the situation is bound to get worse as inflation drives up the cost of many basic commodities. A system of rationing bank notes was put into place last Friday limiting cash withdrawals to only Z$5 million. Our Harare correspondent Simon Muchemwa reports that people have been staying in queues overnight to ensure success in the morning. He said the cash shortages became critical about 2 weeks ago and the banks had finally run dry by Friday. The Reserve Bank has in the past just printed more notes but this time around financial analysts say the government cannot even afford the ink and paper needed to print more.

Muchmewa said many people who come from small towns to withdraw money from banks in Harare or Bulawayo wind up stuck for several days because they have to withdraw small amounts each day till they have enough to meet their needs and to justify the trip. He expects the problem to get worse this week as many salaries are due and civil servants are expecting hefty salary increases promised by government. The opposition led by Morgan Tsvangirai has been rallying Zimbabweans to participate in mass action, and the salary hikes were criticised as an attempt to bribe the people away from such activities.

An IRIN news agency report said the Reserve Bank’s plans to print about Z$60 trillion were briefly delayed because the government failed to secure foreign currency to buy ink and special paper for printing money. Muchemwa said some people are using their credit cards to pay for some daily needs but many people do not have that capacity. High-denomination bearer cheques were introduced in 2004 as inflation kept pushing prices higher. But the government has not found a long-term solution to its economic woes. Observers believe it will be the economy’s failure that will finally drive the Mugabe regime out of office or force ZANU-PF to negotiate with the opposition.