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Desperate measures fail to curb cash crisis
 
By Our Correspondent
 
HARARE, May 9, 2008 (thezimbabwetimes.com) - A range of desperate measures aimed at ending an unprecedented shortage of local bank notes has dismally failed to improve the cash crisis situation in Zimbabwe, banking officials said on Thursday.

Queues inside banking halls and at cash machines grew even longer as desperate depositors tried to withdraw cash to pay school fees or for groceries.
“The cash situation is still the same; it's still in short supply,” said one cashier inside a banking hall crowded with restive clients. “We have even reduced our maximum allowance today to enable everyone to get something from the little cash we have.”
Zimbabwe is in its second month of a cash crunch attributed to hyperinflationary conditions, a growing foreign exchange parallel market and lack of confidence in the system that have led to a higher demand for cash and to hoarding. The government has imposed a series of measures in a desperate bid to help ease the shortage.
On May 5, Reserve Bank governor Gideon Gono introduced new $100 million and $250 million denomination bills, ostensibly to ease the cash crisis. RBZ governor Gideon Gono said the introduction of the new bills would ease the crisis. He said the bills would start circulating immediately.
Economists say the introduction of the extremely high bills clearly showed the stunning failure by government to rein in Zimbabwe’s inflation, currently the highest in the world at nearly 165 000 percent.
Economic experts blame the hyperinflationary environment to bloated government expenditure and distortions in the pricing structure.
The Zimbabwean authorities have maintained price controls on goods and services, a development that has forced most products to disappear from shop shelves, only to surface on a thriving informal market where they fetch higher prices.
The Mugabe regime has also introduced new laws banning the hoarding of cash by institutions and individuals.
But there has not been any marked improvement in the cash crisis. The cash shortages have forced above-average earners to rely almost entirely on cards and cheques.
But the lower-earning majority without cheque accounts, who are forced to rely on cash for all their transactions, form the majority of people to be found in cash queues.
“It looks as if we are at a political rally,” quipped a woman who had been queuing at a cash machine since 6 am on Wednesday. By midday no cash had been dispensed because the bank was waiting for cash deposits to feed notes into the machine.
Every street corner where there is a banking hall or a cash machine was crowded with visibly exhausted people.
“I have been coming here every day since last week. My landlord wants his rent and he will not take anything but cash,” said Manfred Phiri, a factory worker.
 
Banks are restricting the amount of cash that a client can withdraw in a day, and by Monday some banks had again slashed the maximum limit of $5 billion by half. A loaf of bread costs about $100 million.
 
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