Institute for War and Peace Reporting | Giving Voice, Driving Change

Mint Struggling as Demand for Cash Spirals

With astronomic inflation requiring more and more new banknotes, the country’s mint is finding it hard to cope.
By Chipo Sithole
Targeted sanctions have hit the Reserve Bank of Zimbabwe, RBZ, hard, with central bank governor Gideon Gono last week saying the country’s mint, Fidelity Printers and Refiners, needs 500 million US dollars of fresh investment to overhaul its overworked, creaky and archaic money-printing machines.

The machines, both in the capital and in the second city of Bulawayo, are collapsing under the weight of an unprecedented demand for cash in a country with the highest inflation rate in the world.

A relatively new coin-minting machine in Bulawayo installed in the late 1990s has stopped production, not only because hyperinflation means coins are no longer instruments of trade, but because the central bank does not have the cash to import spares.

A German firm, Gieseck and Devrient, G&D, had been sending heavily-guarded planeloads of banknote paper to Zimbabwe so that more money could be printed. But since the flights were suspended on orders from the German government in mid-2008, cash shortages have dramatically worsened, with the final admission last week that the government could no longer cope.

With inflation topping 6.5 quindecillion novemdecillion per cent, Fidelity Printers’ systems cannot cope anymore with the extraordinary demand for cash.

The central bank recently lopped off ten zeroes from the battered Zimbabwe dollar, ZWD, and introduced a new family of banknotes, the highest value being 500 ZWD, worth ten US dollars.

Gono, whose tenure is the subject of a dispute between ZANU-PF and the Movement for Democratic Change, MDC, said the printing capacity at the mint needed to be expanded immediately to meet demand. He said he would require an injection of 500 million US dollars in investment for the money-printing machines.

"The growing demand for currency can only be met through increases in the denominations of the notes”, for which there is no capacity, Gono said in a monetary policy review statement on February 2.

But even if investment the investment was found, Zimbabweans would have to wait almost 24 months while the creaky money-printing systems were revamped, Gono said.

G&D had been flying planeloads of banknote paper every week into Harare, but a ban on supplies was imposed during the orgy of violence that followed the devastating loss by Robert Mugabe and his ZANU-PF party in the March 29 general elections last year.

German leader Chancellor Angela Merkel has taken a tough stance on Zimbabwe, speaking out to insist that the world cannot stand by while "human rights are trampled underfoot".

Gono said because of mounting demand for cash amid serious supply constraints caused by Germany’s suspension of banknote paper supplies, he was forced to print more higher denomination notes.

G&D used to deliver 432,000 sheets of banknotes every week to Fidelity Printers, where they were stamped with the denomination. Each sheet contained 40 notes.

The end of these crucial supplies has forced the mint to make do with an aged, archaic and collapsing money-printing system set up by the Germans in the late 1970s. As for the paper the money is now printed on, it resembles bond paper with no security features, not even watermarks.

Gono has tried to shift the blame for his handling of the economy on sanctions, pointedly the suspension of banknote paper, which he gave as evidence of antagonism against the Harare administration by European Union countries.

The controversial central bank chief has steadfastly dismissed mounting calls for his ouster. The MDC has said one of its first tasks in the new inclusive government is to make sure Gono is fired.

The MDC accuses Gono of wrecking the economy and says there is no sane investor who will pump desperately needed foreign currency into Zimbabwe if Gono remains head of the central bank, which in the past has been accused of embezzling donor funds.

Chipo Sithole is the pseudonym of an IWPR-trained journalist.