Moneymanagement’s Weblog

Inflation and currency with an expiry date

Posted in interesting by moneymanagement on July 28, 2008

In a sign of the growing worthlessness of Zimbabwe’s currency, the country’s central bank on Tuesday introduced two new banknotes – a Z$100 million note and a Z$250 million note.

The launch of the new notes, which was announced on state television, comes barely a month after the Reserve Bank launched what has been until now the largest single note – Z$50 million.

But with inflation running at over 2.2 million percent per annum, Z$50 million no longer buys a loaf of bread, which costs about Z$80 million. A bunch of five bananas also comes out at close to Z$100 million.

The new notes, like all Zimbabwean bank notes, are bearer’s cheques with an expiry date. The smaller notes expire at the end of June 2008.

Regular issues of banknotes have not been in circulation at all since the country’s monetary reform of 1 August 2006, because of heavy inflation. In addition different denominations of the Zimbabwe dollar were issued to cope with the rapidly rising cost of living. There are currently two types of Zimbabwean promissory notes in circulation: Bearer Cheques, which carry a time limit on the period in which it is valid for. On 15 May 2008, Special Agro Cheques (Agricultural Cheques) were issued for use by Zimbabwean farmers, although it may have found its way into regular use as prices continue to rise. These cheques also carry a time limit and a low level of security features. Currently both cheques carry the signature of the Governor, Dr. Gideon Gono.

Are we still complaining about inflation ?

Latest Update: Zimbabwe’s bank chief plans new currency reforms — removing “more zeros” from the plummeting Zimbabwe dollar and raising the limit on cash withdrawals — to tackle the country’s runaway inflation and cash shortages, state media reported Sunday.

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