Zimbabwe in Cash Crunch

(Harare, Zimbabwe) With inflation running wild, the value of a Zimbabwean dollar (Z$) has deteriorated to the point where US$1.00 is worth Z$35 billion. The actual rate of inflation is currently estimated by independent economists at somewhere between one million and 10 million percent.

As a result, the amount of paper money in circulation is insufficient to conduct all the normal transactions in Zimbabwean society. And, there's more bad news.

The cash crunch, which makes long queues outside every bank a feature of the city, is expected to worsen substantially since the German company that used to supply the paper for Zimbabwe's banknotes, Giesecke and Devrient, decided to cancel its contract with the Reserve Bank of Zimbabwe (RBZ), citing a "deteriorating" political situation in the country.

"Our decision is a reaction to the political tension in Zimbabwe, which is mounting significantly rather than easing as expected, and takes account of the critical evaluation by the international community, German government and the general public," the company's chief executive, Karsten Ottenberg, said in a statement.

So, not only is there too little actual currency available but the company that makes the paper for the currency has canceled its contract with the nation of Zimbabwe. Therefore, Zimbabwe needs to find a new source of paper for its money.