Holiday in Harare, part 2: You might be having a currency crisis if…

There’s a sign over the front desk in my hotel which reads as follows:

“Non-Zimbabwean guests must pay their accomodation charges in foreign currency.”

I’ve been to several countries where it’s been forbidden to denominate salaries or prices in a foreign currency – you had to pay in the local money, helping ensure that you didn’t end up with two parallel economies (one in dollars or other “hard currency” and another in a local currency), leading to black market trades between the two.

But this sign reflects a much more dire reality. Zimbabwe is desperately short of foreign currency, and their own currency is in an inflationary free fall – CNN reports an annual inflation rate of 1200%. For businesses like my hotel, which makes a lot of purchases abroad to feed guests and keep us in clean sheets, it’s critical to have dollars on hand, since few vendors will accept payment in Zimbabwean dollars. And it’s hard to buy dollars, and probably impossible to buy them at the official exchange rates. So the hotel needs me to pay them in dollars so they can buy the goods to run the hotel for the guests who pay in a currency that’s losing its value every day.

There’s another reason as well. Since the hotel can’t be seen dealing with foreign exchange at black market rates, they are changing dollars at $250 Zim = $1 USD, less than half of the street rate. This means that, to pay my $100 hotel bill, I could change a US $50 on the streetcorner, come back in with $27000, pay my bill at the official rate and have change left over…

(In truth, the opposite happens. The hotel charges me for breakfast in Zimbabwe dollars, then asks me to pay the bill in US dollars, doubling the real cost…)

All of this means that one of my goals for this trip is to leave Zimbabwe with as few Zimbabwean dollars as possible. For one thing, they lose value by the day. For another, they might expire before I come back.

I’ve never seen currency with an expiration date on it before. The bills I carry are, technically, “Bearer Cheques”. They read:

“Pay the bearer on demand Twenty Dollars on or before 31st July 2007 for the Reserve Bank of Zimbabwe, Issue date 1st August 2006.”

In other words, good luck getting my $20 – (about two and a half US cents at today’s black market rate) after August 2007 – the currency is technically worthless at that point. (Friends tell me that previous currency marked like this has been “extended” by legislative act to maintain its worth.)

This currency looks temporary, too. It’s got one ink color (as opposed to the multicolored fantasy of earlier bills) and no security thread. Given how much it costs to print money, how little the bills are worth, and how fast they’ll become worthless, it seems no surprise that a government scrambling to make ends meet might cut some corners in the national mint.

Speaking of cutting, the major innovation in the recently issued bills is the removal of three zeros. This means that the currency is trading at roughly 500:1 to the dollar, rather than 500000:1, which can get a little awkward. Reserve Bank chief Gideon Gono claims that the change was made because the size of the sums involved was beginning to break Zimbabwean banking software… but many speculate that the change was designed to distract people from the relentless pace of inflation.

Many folks still refer to the price of things in terms of how many million something costs. It’s taken me a while to mentally translate “million” as “pound sterling”, which is a rough equivalent. Others seem to be having translation issues as well – banks have this helpful poster outside designed to let you convert from your millions to your thousands. (Note the slogan: “Zero to Hero”)

(An old joke is that Mugabe had succeeded in making all Zimbabweans into millionaires, since that illustrious status used to involve having more than $2 USD. The ugliness of the joke – unless something changes, lots of Zimbabweans will find themselves millionares again soon.)

Even with a big, thick stack of funny money, you’ll have a hard time buying petrol in Harare. Most stations have signs out from that say “Direct Fuel Import Refuelling ONLY”. That translates as “we don’t accept Zimbabwean currency”. To legally purchase fuel, your best bet is to visit a site like Mukuru.com and purchase fuel vouchers using dollars or pounds. You end up receiving a digital voucher, which you can trade in for a quantity of fuel coupons from the Mukuru office in Zimbabwe, which you can then turn into fuel at stations, 20 liters at a time. What you’re doing – technically – is importing fuel from abroad for your own use, not paying for fuel in Zimbabwe with foreign currency, which would be illegal – hence, “Direct Fuel Import”.

And if you don’t have internet access and foreign currency to buy petrol? You buy black market petrol from the back side of the petrol station, paying a sharp premium to the vendor for his willingness to break the law.

Legal petrol is 52 pence a liter, 50 pence in large quantities – close to $2 USD a liter. Bottled water is only slightly less expensive, at $1.50 a liter. This, I suppose, is only fair – bottled water is a commodity bought mostly by tourists and the wealthy. But it’s odd to spend more for two liters of water than for lunch. I’m considering brushing my teeth with beer instead which is, thankfully, about half the cost of bottled water.

My friends tell me that prices of all goods change rapidly – which is to be expected, when the currency is halving in value over the course of a month. I got a taste of this at the psuedo-Texan steakhouse I made the error of having dinner in last night. The menus were glossy and professionally printed… but lacked prices. The prices were printed on a separate sheet of paper, xerox’ed and placed in a laminate folder. I’d expected prices to have been scratched out on menus – the decision to print without prices at all seems like a reflection on a state used to the notion that their currency is in free fall and won’t be landing any time soon. (This proved to be true at every restaurant I visited, save the South African Steers chain across the street from my hotel, including room service in the hotel. It’s a bit like being the guest at a fancy restaurant – pick what you want and try not to worry about the cost.)

To review – signs that your economy is in trouble include:
– You can’t use your own money to purchase essential goods and services.
– Critical goods, like petrol, can be purchased by average citizens only if they’re willing to break the law.
– Prices change so fast it’s not worth printing them.
– Your currency includes an expiration date, and may well be worthless before that date.

And it’s probably not good news if you’re brushing your teeth with beer, either.

Cathy Buckle’s August Letters from Zimbabwe includes some powerful and important reflections on the currency situation.

This post is part of the Holiday in Harare series.