German company stops production of Zimbabwe banknote paper

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A Munich-based company Giesecke & Devrient GmbH, which has been supplying Zimbabwe’s Central Bank with papernote paper has ceased doing so with immediate effect.

The German banknote producer said it has stopped “to cease delivering banknote paper to the Reserve Bank of Zimbabwe with immediate

The company says it has taken this step “in response to an official request from the German government and calls for international sanctions by the European Union and United Nations.”

“Our decision is a reaction to the political tension in Zimbabwe, which is mounting significantly rather than easing as expected, and takes account of the critical evaluation by the international community, German government and general public,” reads the company statement.

A shortage of banknote paper could put immense pressure on the Zimbabwean central bank, which has been printing money to keep up with spiralling inflation, currently estimated to be close to 4 million percent.

The Zimbabwe dollar is currently trading at 15 billion to a single US dollar in direct bank buying. The largest Zimbabwean bill in circulation is a 50 billion note.

Economists say with the cancellation of supplies of banknote paper from Germany, the Reserve Bank will have to look for other suppliers that could ship cheaper paper of less quality to Zimbabwe; an option that seems logical as the risk of falsifications is closing into zero.

Or the bank could stop printing Zimbabwe dollars, which also makes sense as the population is moving away from the non-trustable currency, rather trading in goods or foreign currencies.

Zimbabwean authorities recently have indicated that a redenomination of the
Zimbabwe dollar is imminent.

For that, however, new banknotes will have to be printed, and banknote paper will have to be bought. It is not likely that any foreign producer will accept a payment in Zimbabwe dollars for such paper.

Meanwhile, with effect from Wednesday, the troubled central bank further increased the daily maximum cash withdrawal limits for both individual and corporate clients to Z$100 billion, up from Z$25 billion.

Since December last year, the central bank has increased the withdrawal limits on no less than five occasions.

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