November 3, 2008 - http://www.thezimbabwetimes.com/?p=6744
By Our Correspondent
HARARE - The Reserve Bank of Zimbabwe has introduced new $1 million, $500 000 and $100 000 banknotes in a desperate bid to ease the recurrent cash shortages plaguing the inflation-ravaged economy.
The bills will officially come into circulation on Friday, although they were already on the foreign currency dealers market today.
As high as they are, though, the highest bill can only buy eight loaves of bread. The highest new note is equal to just US$6.
The new notes with be the 22nd, 23rd and 24th notes introduced by the Reserve Bank this year alone. The central bank also said it will review cash withdrawal limits to compensate for ever-accelerating inflation.
The withdrawal limit for individuals is still $50 000 a day while that for companies is $10 000.
In a statement last night, the central bank said: “In a market that has become predominantly speculative, most providers of goods and services are demanding cash as the only acceptable means of payment, penalising those that could otherwise be willing and able to use cheques for transaction purposes.
“In the measures underway, the Reserve Bank plans to introduce a number of new, higher denominations, review the cash withdrawal limits as well as commence aggressive campaigns for increased usage of other alternative means of payment.”
“The RBZ is fighting a losing battle,” economist John Robertson said in Harare.
“As long as the inflation remains high, cash shortages will persist. There is need to address the inflation by increasing production so that too goods do not (cost) a lot of money.”
Signs of a severe cash shortage are showing across the country as citizens are currently struggling to access cash from their various bank and financial institutions’ accounts.
A serious cash shortage has persisted since October 2007. The latest negative developments follow the move by German firm, Giesecke and Devrient, to half money paper supplies to Zimbabwe.
Long bank queues are once again part of everyday life in which the maximum withdrawal limit, which people say is too little, forces them to come back to the bank virtually daily. Bank sources hint the cash situation is poised to deteriorate further in the coming weeks.
“Right now, we have a situation whereby the country has no paper coming in, so the money that is currently circulating was printed some time back.”
“Due to the hyper-inflationary environment, there is an urgent need for more new notes, and this is the problem faced by the RBZ,” said an economist with a local bank.
The Munich-based firm, which supplied the RBZ with paper for bearer cheques, was asked by the German government to halt business with Zimbabwe because of concerns it was helping prop up Zimbabwe’s President Robert Mugabe.
In the capital city of Harare, long queues are a daily feature at every bank, but the longest queues can be seen at CABS, Beverley and the POSB.
People wake up to join queues as early as 5am, as long queues can be seen by 6am.
Tuesday, November 4, 2008
Zimbabwean Gold Mines Unable to Operate, Chamber of Mines Says
This just has to go on this page - dreadful news!
Zimbabwean Gold Mines Unable to Operate, Chamber of Mines Says
By Brian Latham
Nov. 4 (Bloomberg) -- Most gold mines in Zimbabwe are unable to operate because the country's central bank hasn't paid them for deliveries of the metal, the country's Chamber of Mines said.
Several mines have been flooded while others are unable to pay workers because payments for gold have been erratic or non- existent for as long as two years, the Harare-based Chamber, which represents the country's bigger gold mines, said in an e- mailed statement late yesterday.
``It is not understandable that at a time when the country requires as much foreign currency as possible, the gold sector, which can generate foreign currency, has deliberately been brought to its knees,'' the Chamber said.
Before Robert Mugabe's government began seizing white-owned commercial farms in 2000, slashing export income and pushing the economy into a recession, gold competed with tobacco as Zimbabwe's biggest export. The country then ranked third in Africa with respect to production of the metal after South Africa and Ghana. It has now been superseded by Tanzania and Mali.
Zimbabwe now has an annual inflation rate of 231 million percent and can't afford adequate supplies of fuel, power and food.
Exploration for new gold deposits has ``completely ceased'', while underground water has flooded several mines that can't afford to repair pumps that normally work 24 hours a day to keep mine shafts dry, the Chamber said.
Fidelity Printers and Refiners Ltd., a unit of the Reserve Bank of Zimbabwe, has a monopoly on all bullion trade in the southern African nation. Calls to Zimbabwe's central bank weren't answered today.
Zimbabwe may produce as little as four metric tons of gold this year, down from seven tons last year, the Chamber said in June. Power and foreign currency shortages, as well as an exodus of skilled manpower, have worsened Zimbabwe's mining crisis, the industry group said at the time.
Gold mining companies in Zimbabwe include RioZim Ltd. and Metallon Corp.
To contact the reporter on this story: Brian Latham via the Johannesburg bureau on pmrichardson@bloomberg.net Last Updated: November 4, 2008 04:02 EST
Zimbabwean Gold Mines Unable to Operate, Chamber of Mines Says
By Brian Latham
Nov. 4 (Bloomberg) -- Most gold mines in Zimbabwe are unable to operate because the country's central bank hasn't paid them for deliveries of the metal, the country's Chamber of Mines said.
Several mines have been flooded while others are unable to pay workers because payments for gold have been erratic or non- existent for as long as two years, the Harare-based Chamber, which represents the country's bigger gold mines, said in an e- mailed statement late yesterday.
``It is not understandable that at a time when the country requires as much foreign currency as possible, the gold sector, which can generate foreign currency, has deliberately been brought to its knees,'' the Chamber said.
Before Robert Mugabe's government began seizing white-owned commercial farms in 2000, slashing export income and pushing the economy into a recession, gold competed with tobacco as Zimbabwe's biggest export. The country then ranked third in Africa with respect to production of the metal after South Africa and Ghana. It has now been superseded by Tanzania and Mali.
Zimbabwe now has an annual inflation rate of 231 million percent and can't afford adequate supplies of fuel, power and food.
Exploration for new gold deposits has ``completely ceased'', while underground water has flooded several mines that can't afford to repair pumps that normally work 24 hours a day to keep mine shafts dry, the Chamber said.
Fidelity Printers and Refiners Ltd., a unit of the Reserve Bank of Zimbabwe, has a monopoly on all bullion trade in the southern African nation. Calls to Zimbabwe's central bank weren't answered today.
Zimbabwe may produce as little as four metric tons of gold this year, down from seven tons last year, the Chamber said in June. Power and foreign currency shortages, as well as an exodus of skilled manpower, have worsened Zimbabwe's mining crisis, the industry group said at the time.
Gold mining companies in Zimbabwe include RioZim Ltd. and Metallon Corp.
To contact the reporter on this story: Brian Latham via the Johannesburg bureau on pmrichardson@bloomberg.net Last Updated: November 4, 2008 04:02 EST
Saturday, November 1, 2008
New Hyperinflation Index (HHIZ) Puts Zimbabwe Inflation at 10.2 Quadrillion Percent
bySteve H. Hanke*Professor of Applied Economics The Johns Hopkins University and Senior Fellow The Cato Institute
Comment - this follows up on John Robertson's report.
Zimbabwe is the first country in the 21st century to hyperinflate. In February 2007, Zimbabwe’s inflation rate topped 50% per month, the minimum rate required to qualify as a hyperinflation (50% per month is equal to a 12,875% per year). Since then, inflation has soared. The last official inflation data were released for July and are hopelessly outdated. The Reserve Bank of Zimbabwe has been even less forthcoming with money supply data: the most recent money supply figures are ancient history—January 2008. Absent current official money supply and inflation data, it is difficult to quantify the depth and breadth of the still-growing crisis in Zimbabwe. To overcome this problem, Cato Senior Fellow Steve Hanke has developed the Hanke Hyperinflation Index for Zimbabwe (HHIZ). This new metric is derived from market-based price data and is presented in the accompanying table for the January 2007 to present period. As of 24 October 2008, Zimbabwe’s annual inflation rate was 10.2 Quadrillion (1015) percent.The HHIZ will be updated weekly and available on the Cato Institute’s web site. www.cato.org/zimbabwe (chart of inflation here)*
Steve H. Hanke is one of the world’s leading experts on exchange-rate regimes. He has played a prominent role in designing and implementing monetary reforms that have stopped very high or hyperinflations in eight countries.
Comment - this follows up on John Robertson's report.
Zimbabwe is the first country in the 21st century to hyperinflate. In February 2007, Zimbabwe’s inflation rate topped 50% per month, the minimum rate required to qualify as a hyperinflation (50% per month is equal to a 12,875% per year). Since then, inflation has soared. The last official inflation data were released for July and are hopelessly outdated. The Reserve Bank of Zimbabwe has been even less forthcoming with money supply data: the most recent money supply figures are ancient history—January 2008. Absent current official money supply and inflation data, it is difficult to quantify the depth and breadth of the still-growing crisis in Zimbabwe. To overcome this problem, Cato Senior Fellow Steve Hanke has developed the Hanke Hyperinflation Index for Zimbabwe (HHIZ). This new metric is derived from market-based price data and is presented in the accompanying table for the January 2007 to present period. As of 24 October 2008, Zimbabwe’s annual inflation rate was 10.2 Quadrillion (1015) percent.The HHIZ will be updated weekly and available on the Cato Institute’s web site. www.cato.org/zimbabwe (chart of inflation here)*
Steve H. Hanke is one of the world’s leading experts on exchange-rate regimes. He has played a prominent role in designing and implementing monetary reforms that have stopped very high or hyperinflations in eight countries.
Saturday, October 25, 2008
Forex and inflation sitrep
The State of Confusion seems to be spearing across the world in ways that could have quite an impact on those of us in the less developed countries. With the pound at £1,55 to the US dollar, gold at less than US$700 an ounce, the rand at almost R12 to the US dollar and all the base metals hovering at their lowest levels in years, we are going to have additional challenges rebuilding the very spots on which we are standing! But here, as before, the rates of change are several orders of magniture faster than the most frightening being experienced anywhere else, and we seem to now be ready to boast the worst hyperinflation experience in history...
EXCHANGE RATE AND INFLATION RATE MOVEMENTS:
COMMENT AND TENTATIVE FORECASTS
The rate of acceleration in the Zimbabwe dollar’s decline has hit new records in each of the last few days. If the Old Mutual Implied rate is used to measure the fall, simple arithmetic shows that we are about to see the return of nine of the ten zeros taken off less than three months ago, and it is easy to see that all eleven will be back before the end of October.
In one of the attached tables, I have made an attempt to demonstrate how much bigger the Zimbabwe dollar numbers will get if we remain committed to stay on the current course. The use of the word “committed” is deliberate: government has demonstrated repeatedly that it can see no reason to move away from the policies of recent years, claiming that all the reasons why the economy’s performance has deteriorated are to be found in the results of “illegally-imposed sanctions on the economy, contrived and dishonest attempts to discredit the democratically elected leaders of this sovereign state and malicious attempts to promote regime change”.
Discussions on the non-existence of sanctions until a few months ago, on the way that the leadership discredited itself without any outside help and on how almost all Zimbabweans – Zanu PF supporters included – want to see regime change can go round in circles forever, but they can all too easily side-step the fundamental issues: the economy has been crippled, the country still has no effective government, the authorities have no legal backing for the controls and restrictions they are imposing through the financial services sector and the Zimbabwe dollar has been rendered valueless by the process.
Today, the Zimbabwe dollars we are trying to use to measure the values of goods, labour, rentals or social services are less than a billionth of their values of a mere 58 working days ago. And while government remains persuaded that the policy choices it has made are not at fault, Zimbabweans will be forced to rely increasingly on the use of US dollars, rands or any other acceptable and locally available currency.
The trends shown in the tables are bad enough for the months of the recent past, but in trying to gauge where similar trends will take us in future months soon carries the numbers into the realms of sextillions and septillions – 21 to 24 zeros – to which the thirteen we have already dropped have to be added to get the full measure of how defensible our policies have been.
On the assumption that attempts will be made through the coming year to bring down the rate of inflation, and that these will involve restoring productive processes rather than punishing and subjugating producers, I have suggested a steady decline in the monthly inflation rate from January onwards. If Zimbabwe were to succeed in persuading lenders to offer Balance of Payments support to permit imports to be increased without forcing up the cost of foreign exchange, the decline in inflation could be more rapid.
However, even at the declining rates of inflation shown, the annual rate of inflation will continue to rise during the first half of 2009 and, on the suggested falling inflation rates, will subside to about its current October 2008 estimated level only after September 2009.
With more sensible policies and the courage to float the exchange rate, to remove the hierarchy’s privileges and to restore civil and property rights, Zimbabwe could do very much better than this forecast table suggests.
Unfortunate developments elsewhere in the world will no doubt add to the uncertainties, particularly in respect of earnings from commodity exports and the prospects of attracting new investment inflows into new mining ventures and into the resuscitation of commercial agriculture. However, as every other supplier of commodities around the world will face the same uncertainties, Zimbabwe’s position might well be determined more by the adoption of acceptable policies than by the difficulties in the markets.
---------------------
John Robertson
COMMENT AND TENTATIVE FORECASTS
The rate of acceleration in the Zimbabwe dollar’s decline has hit new records in each of the last few days. If the Old Mutual Implied rate is used to measure the fall, simple arithmetic shows that we are about to see the return of nine of the ten zeros taken off less than three months ago, and it is easy to see that all eleven will be back before the end of October.
In one of the attached tables, I have made an attempt to demonstrate how much bigger the Zimbabwe dollar numbers will get if we remain committed to stay on the current course. The use of the word “committed” is deliberate: government has demonstrated repeatedly that it can see no reason to move away from the policies of recent years, claiming that all the reasons why the economy’s performance has deteriorated are to be found in the results of “illegally-imposed sanctions on the economy, contrived and dishonest attempts to discredit the democratically elected leaders of this sovereign state and malicious attempts to promote regime change”.
Discussions on the non-existence of sanctions until a few months ago, on the way that the leadership discredited itself without any outside help and on how almost all Zimbabweans – Zanu PF supporters included – want to see regime change can go round in circles forever, but they can all too easily side-step the fundamental issues: the economy has been crippled, the country still has no effective government, the authorities have no legal backing for the controls and restrictions they are imposing through the financial services sector and the Zimbabwe dollar has been rendered valueless by the process.
Today, the Zimbabwe dollars we are trying to use to measure the values of goods, labour, rentals or social services are less than a billionth of their values of a mere 58 working days ago. And while government remains persuaded that the policy choices it has made are not at fault, Zimbabweans will be forced to rely increasingly on the use of US dollars, rands or any other acceptable and locally available currency.
The trends shown in the tables are bad enough for the months of the recent past, but in trying to gauge where similar trends will take us in future months soon carries the numbers into the realms of sextillions and septillions – 21 to 24 zeros – to which the thirteen we have already dropped have to be added to get the full measure of how defensible our policies have been.
On the assumption that attempts will be made through the coming year to bring down the rate of inflation, and that these will involve restoring productive processes rather than punishing and subjugating producers, I have suggested a steady decline in the monthly inflation rate from January onwards. If Zimbabwe were to succeed in persuading lenders to offer Balance of Payments support to permit imports to be increased without forcing up the cost of foreign exchange, the decline in inflation could be more rapid.
However, even at the declining rates of inflation shown, the annual rate of inflation will continue to rise during the first half of 2009 and, on the suggested falling inflation rates, will subside to about its current October 2008 estimated level only after September 2009.
With more sensible policies and the courage to float the exchange rate, to remove the hierarchy’s privileges and to restore civil and property rights, Zimbabwe could do very much better than this forecast table suggests.
Unfortunate developments elsewhere in the world will no doubt add to the uncertainties, particularly in respect of earnings from commodity exports and the prospects of attracting new investment inflows into new mining ventures and into the resuscitation of commercial agriculture. However, as every other supplier of commodities around the world will face the same uncertainties, Zimbabwe’s position might well be determined more by the adoption of acceptable policies than by the difficulties in the markets.
---------------------
John Robertson
Thursday, October 23, 2008
Exchange rates
23 october 2008
Exchange rate movements have been accelerating in the past few days and I offer this attached table with some concern as it is likely to be rendered out of date within hours rather than days. However, the history of the collapse might be of interest. You will see that a US dollar now costs close to three billion Zimbabwe dollars if you work through the Old Mutual share price, and that has moved a thousand-fold in about eight working days. So the landslide is turning into an avalanche! The sharp movements are not always mirrored immediately by the changes in other rates, but as the record shows, the OMIR has often become a good leading indicator.
While power-sharing talks continue to be confounded by contrived confusions, not one of the efforts in the political arena has drawn attention to the mayhem in the productive sectors or the banking industry. The Zimbabwe dollar is virtually unobtainable in the numbers needed to transact even the most basic business, so it has rapidly fallen from use and most traders are opting for foreign exchange whenever they can.
The total lack of concern being shown by the authorities for the plight of ordinary people appears to stem from the official beliefs that the people have brought their hunger and poverty upon themselves. This they did by not making full and productive use of all the resources transferred to them through the various confiscation and redistribution processes that government has been so generously administering for the past few years.
I hope the table is useful. I will send a further up-date as soon as I can assemble a figures for a few more days.
Kindest regards,
John
Exchange rate movements have been accelerating in the past few days and I offer this attached table with some concern as it is likely to be rendered out of date within hours rather than days. However, the history of the collapse might be of interest. You will see that a US dollar now costs close to three billion Zimbabwe dollars if you work through the Old Mutual share price, and that has moved a thousand-fold in about eight working days. So the landslide is turning into an avalanche! The sharp movements are not always mirrored immediately by the changes in other rates, but as the record shows, the OMIR has often become a good leading indicator.
While power-sharing talks continue to be confounded by contrived confusions, not one of the efforts in the political arena has drawn attention to the mayhem in the productive sectors or the banking industry. The Zimbabwe dollar is virtually unobtainable in the numbers needed to transact even the most basic business, so it has rapidly fallen from use and most traders are opting for foreign exchange whenever they can.
The total lack of concern being shown by the authorities for the plight of ordinary people appears to stem from the official beliefs that the people have brought their hunger and poverty upon themselves. This they did by not making full and productive use of all the resources transferred to them through the various confiscation and redistribution processes that government has been so generously administering for the past few years.
I hope the table is useful. I will send a further up-date as soon as I can assemble a figures for a few more days.
Kindest regards,
John
Thursday, October 16, 2008
From the Sunday Mail Colour Magazine dated 27 July 1980
In 20 years your grocery bill will be $530 a month!
By Stella day
Inflation may not only be the ruin of the working classes in 20 years time. It would well be the ruin of the rich, too, if it continues at its present rate of 12 percent in Zimbabwe to the year 2000.
If you were a pensioner living on a fixed monthly income of, say, $500 a month you wouldn't even be able to pay your rent.
Economists calculate that based on our present 1 percent inflation yearly up to 2000, a modest rental of $80 today would have increased to at least $578 a month. Even a normal grocery and food bill of $55 a month today would cost $530 a month then - again more than a fixed pension.
A loaf of bread (21c today) would cost at least $2; a bottle of mil (600ml) at16c would be $1.54 and a modest 5kg of maize meal costing 51c now would cost $4.92 at the urn of the century - the same price you would have to pay for a packet of 30 cigarettes.
If yo wanted to get away from it all and holiday in Britain the return excursion flight, at present 660 would be $6366.
Even a short return business trip to Johannesburg, now about $178 would set you back $1717. A packet of crisps for a child to nibble on the journey at 10c today would cost just short of a dollar - 96c.
If you wanted to celebrate New year 2000 with a bottle of whiskey (today about $12.50 if you can get scotch), the cost then would be at least $10.
A modest luncheon for two at at $10 for yourself and wife or girlfriend would then be at least $96 and a small bouquet would set you back $48 as a token of your regard.
She would have to pay bout $145 for a dress cosing only $15 today and that smart $80 suit you've just bought would co you $578 in 000.
"Fine", you might say. "But then my present salary of about $70 a month would have increased with inflation to $6752 monthly".
True, but like most things in life the larger costs increase faster than smaller gains.
A middle income house priced at $20000 today would cost $193000 in the year 2000, a $5500 car would be $53000.
But if you had the chance to buy and ounce of gold at $400 today it would be worth about $3858 in 20 years time at the present rate of inflation inZimbabwe A Salisbury economist. Mr John Robertson, said "at our present rate of inflation, which is not high compared with some other countries, i the year 2000 the dollar value today would have the purchasing power of only about 10c or slightly less today's money".
Well - neither Stella nor John were far wrong - and now..........well that is another story!
By Stella day
Inflation may not only be the ruin of the working classes in 20 years time. It would well be the ruin of the rich, too, if it continues at its present rate of 12 percent in Zimbabwe to the year 2000.
If you were a pensioner living on a fixed monthly income of, say, $500 a month you wouldn't even be able to pay your rent.
Economists calculate that based on our present 1 percent inflation yearly up to 2000, a modest rental of $80 today would have increased to at least $578 a month. Even a normal grocery and food bill of $55 a month today would cost $530 a month then - again more than a fixed pension.
A loaf of bread (21c today) would cost at least $2; a bottle of mil (600ml) at16c would be $1.54 and a modest 5kg of maize meal costing 51c now would cost $4.92 at the urn of the century - the same price you would have to pay for a packet of 30 cigarettes.
If yo wanted to get away from it all and holiday in Britain the return excursion flight, at present 660 would be $6366.
Even a short return business trip to Johannesburg, now about $178 would set you back $1717. A packet of crisps for a child to nibble on the journey at 10c today would cost just short of a dollar - 96c.
If you wanted to celebrate New year 2000 with a bottle of whiskey (today about $12.50 if you can get scotch), the cost then would be at least $10.
A modest luncheon for two at at $10 for yourself and wife or girlfriend would then be at least $96 and a small bouquet would set you back $48 as a token of your regard.
She would have to pay bout $145 for a dress cosing only $15 today and that smart $80 suit you've just bought would co you $578 in 000.
"Fine", you might say. "But then my present salary of about $70 a month would have increased with inflation to $6752 monthly".
True, but like most things in life the larger costs increase faster than smaller gains.
A middle income house priced at $20000 today would cost $193000 in the year 2000, a $5500 car would be $53000.
But if you had the chance to buy and ounce of gold at $400 today it would be worth about $3858 in 20 years time at the present rate of inflation inZimbabwe A Salisbury economist. Mr John Robertson, said "at our present rate of inflation, which is not high compared with some other countries, i the year 2000 the dollar value today would have the purchasing power of only about 10c or slightly less today's money".
Well - neither Stella nor John were far wrong - and now..........well that is another story!
Wednesday, October 15, 2008
Exchge Rate Update
Sent out 4 October 2008
Despite Reserve Bank re-affirmations that its suspension of RTGS and inter-bank transfers still apply and that cheque clearing procedures are quick and efficient, the recent policy impositions continue to create havoc and the rates of change in the various currency markets continue to accelerate. The Zimbabwe dollar has become virtually unusable and most of us cannot get our hands on them anyway, so the rates to the US dollar are becoming more important by the day.
I have updated the table sent to you previously as best I can. In the lower pportion of the table my percentage changes against the more-or-less equivalent days of one month earlier will offer a reasonable guide to the monthly inflation rate, so we might be looking at figures of around 9 000 to 10 000 for September and well above 20 000% for October, so far. Like it or not, we are "dollarising" fast.
As for forecasts, I hope the additional table that shows the month-end parallel market exchange rates compared to their equivalents last year will be helpful. The forecasts in the shaded portion for the last quarter are based on the assumption that the average daily rate for the last few months persists for the next few. The 228 quadrillion percent shown for December will, if it is reached, earn for Zimbabwe several unflattering mentions in the Guiness Book of Records.
RBZ is slow to update the inter-bank rates. Perhaps, at last, they are a source of embarrassment?
My best wishes through the coming uncertainties.
Kindest regards,
John
Despite Reserve Bank re-affirmations that its suspension of RTGS and inter-bank transfers still apply and that cheque clearing procedures are quick and efficient, the recent policy impositions continue to create havoc and the rates of change in the various currency markets continue to accelerate. The Zimbabwe dollar has become virtually unusable and most of us cannot get our hands on them anyway, so the rates to the US dollar are becoming more important by the day.
I have updated the table sent to you previously as best I can. In the lower pportion of the table my percentage changes against the more-or-less equivalent days of one month earlier will offer a reasonable guide to the monthly inflation rate, so we might be looking at figures of around 9 000 to 10 000 for September and well above 20 000% for October, so far. Like it or not, we are "dollarising" fast.
As for forecasts, I hope the additional table that shows the month-end parallel market exchange rates compared to their equivalents last year will be helpful. The forecasts in the shaded portion for the last quarter are based on the assumption that the average daily rate for the last few months persists for the next few. The 228 quadrillion percent shown for December will, if it is reached, earn for Zimbabwe several unflattering mentions in the Guiness Book of Records.
RBZ is slow to update the inter-bank rates. Perhaps, at last, they are a source of embarrassment?
My best wishes through the coming uncertainties.
Kindest regards,
John
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