Central Malaita Student Association Blog Site: Mugabe's $1000 note is already a waste of money

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Wednesday, February 14, 2007

Mugabe's $1000 note is already a waste of money

Sydney Herald News
Peta Thornycroft in Johannesburg
February 14, 2007

INFLATION in Zimbabwe has reached such proportions that it destroyed the value of a new national currency before a single one of its banknotes had been spent. The largest note, $Z1000, buys just one tomato.

The world's highest inflation rate, which rose to a record 1594 per cent on Monday, rendered the new money worthless before it could be distributed. Mounds of banknotes - all paid for in scarce hard currency - are lying unused in warehouses.

The regime of the President, Robert Mugabe, ordered the new money in 2004. At that time, inflation was a relatively modest 400 per cent and Mr Mugabe was anxious to avoid the impression of economic chaos.

The information minister at the time, Jonathan Moyo, disclosed that Mr Mugabe had personally insisted that a banknote of $Z1000 could be the highest denomination of the new currency.

"In early 2004 Mugabe thought that inflation had been conquered and he refused to allow notes of a value higher," Mr Moyo said. Yet by the time the new currency had been designed, printed and delivered, the $Z1000 banknote had a purchasing power of about 23 cents. Today, it would be just enough to buy a box of matches.

Rather than release a currency whose largest banknote is roughly the value of a tomato, the Reserve Bank simply stockpiled the useless money.

At present, prices in Zimbabwe double roughly every 30 days. Food prices are thought to be rising even faster than the general inflation rate. One supermarket chain estimated that grocery inflation was running at about 3000 per cent and predicted that food prices would be changing hourly by May.

"To survive, we have to increase prices every time new stock arrives," the owner of one Harare supermarket said.

Inflation began accelerating after the Mugabe regime crippled commercial agriculture - Zimbabwe's biggest export earner - by seizing farms owned by Caucasians.

Having disabled the engine of the economy and destroyed its tax base, the Government resorted to printing money to pay its own bills. This boosted inflation and drove down the value of the currency. Prices soared in 2005, when Mr Mugabe repaid Zimbabwe's debts to the International Monetary Fund. The Reserve Bank accomplished this feat by the simple expedient of printing about $Z21 trillion.

Last week 180,000 civil servants, who had their salaries trebled in January, demanded another increase of 400 per cent. This would keep their earnings just above $US1 ($1.30) a day - the internationally accepted measure of absolute poverty. But the value of a 400 per cent pay rise will be wiped out within four months.

The regime has announced meanwhile, that it will spend more than $1.5 million on national celebrations to mark Mr Mugabe's 83rd birthday on February 21. Zimbabwe's public are being asked to make donations.

posted by administrator @ 9:11 AM

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