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As Inflation Surges, Zimbabwe Automatic Tellers Dispense Z$10K Bills

Banks in Zimbabwe are no longer distributing bills smaller than $10,000 through their automated teller machines, which some observers are taking as a sign the Reserve Bank of Zimbabwe might have to lop more zeroes off the currency this year.

The Z$10,000 note is worth US$2 on the parallel foreign exchange market.

The central bank trimmed three zeroes off the currency on July 31, 2006, in what the monetary authority called Operation Sunrise, then called in all old bank notes in a chaotic process in which police arbitrarily seized sums deemed to be ill-gotten.

But the so-called bearer notes issued during and after that currency overhaul quickly lost their value as the exchange rate on the parallel currency market gravitated to around Z$5,000 per U.S. dollar while the official rate has remained at Z$250.

Bankers said that with inflation approaching 1,600% it makes no sense to load ATMs with small-denomination bills. Soaring inflation is also putting pressure on Reserve Bank Governor Gideon Gono to delay the introduction of a new currency.

Reserve Bank sources said new notes were printed by the German firm Giesecke & Devrient in July and were intended to be introduced some time this month.

Economist John Robertson of Harare told reporter Blessing Zulu of VOA's Studio 7 for Zimbabwe that bankers are doing the right thing by shifting to larger denominations.

In other economic news, the cabinet has assigned newly appointed Finance Minister Samuel Mumbengegwi and Economic Development Minister Sylvester Nguni to revive business-labor-government wage talks in hopes of forging a new social contract that might help the government cope with burgeoning labor disputes. The two ministers were to be assisted by RBZ chief Gono and Labor Minister Nicholas Goche.

Cabinet insiders said a new social contract is Harare’s only hope of pulling back from the brink of total economic collapse and deepening social upheaval.

Business and labor both want a firm commitment from Harare, for different reasons.

The Zimbabwe National Chamber of Commerce is unhappy about arrests of business executives over alleged price gouging on essential goods. Business leaders clashed with Mumbengegwi in 2004, when he held the trade portfolio; he told a Congress of Industries meeting that Zimbabwe did not need the International Monetary Fund.

So the business community doubts Mumbengegwi can deliver the needed reforms.

Zimbabwe Congress of Trade Unions President Lovemore Matombo said that while the labor body welcomes new tripartite talks, it doubts Harare's sincerity.

More reports from VOA's Studio 7 for Zimbabwe...