It has come to this: Zimbabwe is about to run out of the paper to print money on.
Fidelity Printers & Refiners, the state-owned company that churns out bank notes for the Robert Mugabe regime, was thrown into a crisis early this month after a German company stopped supplying the necessary paper because of concerns over Zimbabwe’s recent violent presidential election, widely seen as fraudulent by international observers.
The printing operation drastically slowed. Two-thirds of the 1,000-strong workforce was ordered to take a leave, and two of the three money-printing shifts were canceled.
The result on the streets was an immediate cash crunch.
“If you think this currency shortage is bad, wait two weeks. By then it will be a disaster,” said a senior Fidelity staffer, who spoke on condition of anonymity because he feared reprisal for talking to a Western journalist. The paper will run out in two weeks, he said.
Fidelity Printers is Mugabe’s lifeline. It prints the money to pay the police, soldiers and intelligence organs that keep the regime in power. Lately the money has been used to set up a network of command bases across the country staffed by liberation war veterans and youth militias, considered paid muscle to terrify the population into voting for Mugabe in the June 27 presidential runoff.
If the regime cannot pay the security forces on which it relies, it would face economic paralysis — and potential collapse.
Zimbabwe’s economic meltdown harks back to the collapse of its major export industry, commercial farming, after Mugabe’s controversial land reform program early in the decade. That left the nation starved of foreign exchange, but government spending went on.
How did it do that? It printed money. But printing more and more money without an increase in productivity fueled rampant hyperinflation.
As hyperinflation spiraled last year, Fidelity printed million-dollar notes, then 5 million, 10 million, 25 million, 50 million. This year, it has been forced to print 100 million, 250 million and 500 million notes in rapid succession, all now practically worthless. The highest denomination is now 50 billion Zimbabwean dollars (worth one U.S. dollar on the street).
Despite the recent currency shortage, the Zimbabwe dollar has continued to slide against the U.S. dollar, and shopkeepers are increasing their prices steeply. The price of the state-owned Herald newspaper went from 200,000 Zimbabwean dollars early this month to 25 billion now.
Before the crunch, a beer at a bar in Harare, the capital, cost 15 billion Zimbabwean dollars. At 5 p.m. July 4, that beer cost 100 billion ($4 at the time) in the same bar. An hour later, the price had gone up to 150 billion ($6).
Apart from the paper crisis, the real fear at Fidelity is that its software license for the European bank note design technology could be withdrawn because of new sanctions threatened against the Mugabe regime, the staffer said. The design department is crucial: It must constantly conceive new notes as those on the streets are rendered worthless by hyperinflation.
“If that happened, that would be it,” the staffer said.
For most Zimbabweans, the economic crisis boils down to one thing: how to put food on the table. It’s a difficult trick when you have no job, or if the bus fare costs more than your pay, and the prices in shops keep going up.
“Everyone is struggling to keep up with this mounting pressure, day by day,” said John Robertson, an economist in Harare. “It’s a thing that gradually creeps up. Some people have already succumbed. Some factories have closed. More are likely to succumb as prices rise.”
Everyone at Fidelity Printers knows the money printing is propping up Mugabe, the staffer said. Despite the threat to their jobs, some secretly hope for breakdowns and paper shortages, he said.
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