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Cash Shortage Looms in Zimbabwe After Big State Pay Raises

Zimbabwe's requirements for cash in circulation have increased so much in the wake of a recent round of public sector pay raises of up to 300% that the Reserve Bank of Zimbabwe may have to add zeros to existing bills or issue larger denominations.

Harare economist John Robertson says the central bank needs to double the cash in circulation or add zeros to the bills now in the hands of the public to avoid a shortage of currency as was seen in 2003. At present the highest denomination is Z$50,000, or about 50 U.S. cents, but that won't even buy a loaf of bread costing Z$85,000.

The central bank is preparing to introduce a Z$100,000 bearer check - essentially a recycled bill of a lower denomination. But Robertson says the RBZ needs to bring out Z$500,000 and Z$1 million bills to avoid leaving Zimbabweans without enough cash to carry out routine transactions - or wasting a lot of paper printing smaller bills.

A Finance Ministry official, speaking on condition of anonymity, said adding zeros and printing larger denominations are under consideration. Finance Minister Herbert Murerwa declined to comment on the looming cash crunch.

Reporter Blessing Zulu of VOA's Studio 7 for Zimbabwe spoke with Harare economist James Jowa, who said adding zeros would be a counter-productive move.

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