For a little more than a year now, I’ve been carrying in my wallet a $500 Zimbabwean bearer cheque, an odd form of currency designed to expire after a few months, a recognition of the overwhelming inflation in that country. The $500 bill, worth roughly one US dollar when I bought it, was the $500,000 before Gideon Gono, the central bank governor, knocked three zeros off the bill in a campaign he called “From Zero to Hero”. That bill is now expired, but it’s a nice complement to the bill a friend just bought me from Zimbabwe – a $50,000,000,000 Agro Check. That’s fifty billion… a mere hundred thousand times the face value of my 21-month old bill. Of course, that Agro Check is now worth less than a US dollar… and it will be worth less by the time I post this note.
It’s a good conversation starter – I’ve been trying to use it for paying for drinks at bars – but it’s not very much fun if this is the bill you actually need to use to pay your debts. Doing math with sums that rapidly hit the quadrillions if you’re trying to buy something like a laptop is pretty surreal. But you’re unlikely to be able to buy that laptop with cash – there’s a restriction in the Zimbabwean banking system that prevents people from taking more than $100 billion out from a bank each day. This leads to some difficult catch-22 situations – it can cost more to go to and from the bank than you can withdraw in a single transaction. Sibangani Sibanda in the Zimbabwe Times reflects that it’s now impossible to get money in Zimbabwe without first borrowing money from friends… and that there’s less money and less friends in Zimbabwe these days.
Fortunately, Gideon Gono is here to rescue us again. Not only will the government introduce a new $100 billion bill – not enough money to buy a loaf of bread, unfortunately – but they will also lop some more zeros off the bills, possibly six zeroes. Gono is confident, saying, “This time, we will make sure that those zeros that would come knocking on the governor’s window will not return. They are going for good.”
Good luck with that, Mr. Governor. Inflation is now somewhere above 2.2 million percent, suggesting that those zeros will be back in no time. In the meantime, people are doing what they do in situations where the currency collapses – they use a hard(er) currency in response – US dollars, UK pounds and South African rand. That’s illegal, but since it’s basically impossible to use the Zim currency, it becomes pretty essential.
There’s a certain dark humor to a situation like this – at a certain point, it likely costs more to print these bills – which still feature security threads and watermarking – than they’re worth. This situation is called “negative seigniorage” in the currency world – it’s a topic of discussion in the US, where it might now make sense to eliminate both the penny and the nickel, but it likely will be a major discussion in Zimbabwe, now that the country’s currency provider is no longer willing to sell paper to the country to print more notes.
Update – Gono plans to lop 10 zeros off the currency, turning $10 billion into $1 new, new Zim dollars. (Keep in mind that a previous revaluation already removed three zeros, so we’re talking about a currency where $10 trillion from two years ago will now equal $1. Estimates suggest up to 9 million percent inflation.)