The recent shortage of dollar bills and coins in Zimbabwe has pushed businesses to print their own vouchers, also known as IOUs or “chits,” according to a recent WSJ article.
Zimbabwe has faced extreme mismanagement of its currency for the past two decades, and levels of inflation that make America’s inflation concerns look tiny in comparison.
Before the Zimbabwe dollar was abolished in 2009 and replaced with the U.S. dollar, monthly inflation peaked at 79.6 billion percent.
After the USD was adopted, there was monetary stability for a few years, until the central bank struggled to meet the demand for U.S. dollars. The Zimbabwe Central Bank reintroduced the Zimbabwe dollar in early 2019, setting $1 USD equal to $1 Zimbabwean dollar. Inflation on the Zimbabwe has resumed at an eye-watering pace—today, $1 USD is worth around 900 Zimbabwean dollars and inflation hit 230% in January.
As a result, most businesses again demand payments in U.S. dollars, while the Zimbabwe dollar remains the official currency. Zimbabwe banks import U.S. dollars from overseas, but not enough of them to meet demand. Furthermore, small change is typically too heavy to be worth it to fly in from overseas.
Restaurants and supermarkets have had to get creative, and some have started printing paper chits with serial numbers or kept books to record customers who are owed money. Smaller stores keep a book with the names of customers they owe money to, or scrawl amounts yet to be reimbursed on receipts. Despite the chits’ drawbacks, most Zimbabweans still prefer them to getting their change in local currency, as people don’t trust the government.
New payment technologies have the potential to address some of these challenges. Electronic payment systems such as mobile money and digital wallets can help address the issue of cash shortages. Mobile money has already gained significant traction in Zimbabwe, and the government has encouraged its use to address the country’s currency problems. For example, the app InnBucks allows people to receive change on their phones, into a digital wallet.
Alternatively, cryptocurrencies could be another way for Zimbabweans to store value. The issue is that while this may be a good solution for long-term savings, dollars are more useful in day-to-day transactions, at least as of now.