Zimbabwe's cash is hard to find or use

HARARE, Zimbabwe - First fuel began running out. Then food became scarce. Now, with inflation out of control, Zimbabwe can't print its increasingly worthless money fast enough.

The desperate currency shortage, which has forced riot police to defend banks against angry Zimbabweans, is the latest blow in this southern African nation whose once-prosperous economy has collapsed.

People can't get enough cash to buy even the small amounts of food and other necessities they can barely afford. As dusk fell Wednesday, street vendors in the capital packed up still-full carts and baskets of vegetables, fruit, nuts, candies and cigarettes and headed home.

The government blames the cash shortage mainly on hoarding. It announced plans Wednesday to withdraw Zimbabwe's highest denomination bank note in 60 days, replacing it to force hoarders to turn in old bills.

But analysts said the currency crisis is simply a symptom of a deeply sick economy that has been dragged down by the government's chaotic policies.

"There no confidence in the economy and nothing to stop new notes again being kept outside the system immediately after the changeover," said Witness Chinyama, an independent economist in Harare.

An estimated 70 percent of Zimbabweans are unemployed. Officially, inflation is running at 365 percent a year, but the price rise is really closer to 700 percent once the thriving black market in scarce food and fuel is factored in.

Zimbabwe is plagued by a hunger crisis threatening an estimated 4-million people, nearly one-third of the population. It also is suffering from fuel shortages that have crippled industry and transportation.

The crisis is blamed partly on the state's seizure of thousands of white-owned commercial farms, which were the backbone of the agriculture-based economy. The land was taken for redistribution to blacks, but many of those farms now lie fallow.

Foreign investment and aid have dried up to protest human rights abuses by the government as well as last year's disputed presidential election, which gave President Robert Mugabe another six-year term. Mugabe has been president since independence in 1980.

A chronic shortage of dollars and other hard currencies has made it difficult to import needed goods, including the special paper and seals that the central bank uses to print Zimbabwean money.

Even if it had those supplies, the bank said last month, its printing machines would not be able to produce the 1-million notes a day needed to ease the currency shortage.

Finance Minister Herbert Murerwa said Wednesday that the current 500 Zimbabwe dollar note - about 60 cents at the official exchange rate and less than 20 cents at the black market rate - will cease to be legal tender by Sept. 30 and will be replaced with a new bill of the same value.

State radio said Wednesday that the government plans to introduce an even bigger value note, a 1,000-dollar bill that will be the largest denomination and just enough to buy a loaf of bread at current prices.

Meanwhile, many banks are running out of currency as the Zimbabweans with jobs try to cash monthly paychecks. Some banks are rationing customers to 10,000 Zimbabwe dollars. The Consumer Council of Zimbabwe estimates an average urban family needs at least 6,000 a day just to survive.

Long lines outside banks have exploded into violence, with frustrated customers smashing bank windows. Riot police have been used.

Executives at private banks said that for much of July the central bank has supplied them with less than 10 percent of their daily currency needs.

Retailers are desperate for currency. They have traditionally offered a 10 percent discount for cash purchases, but are now giving 25 percent off to customers with currency.

Bars and clubs have begun accepting checks for drinks. But there could soon be a check shortage, too, because banks can't print checks fast enough to meet demand. Where they once issued new checkbooks in 48 hours, they now have monthlong waiting lists.

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