Denominational constraints in Zimbabwe

Zimbabweans call it “the coin problem.” Simply put, the country hardly has any. Coins are heavy, making them expensive to ship here. But in a nation where millions of people live on a dollar or two a day, trying to get every transaction to add up to a whole dollar has proved a national headache.

Still, the new predicament is an improvement. By virtually wiping out inflation, analysts say, use of the United States dollar saved Zimbabwe from total economic collapse and brought the country back from the brink. The country’s political future remains deeply unsettled since the disputed 2008 election gave way to a shaky power-sharing government. But its economy is growing, if from a very low base.

Zimbabweans have devised a variety of solutions to get around the change problem, none of them entirely satisfactory. At supermarkets, impulse purchases have become almost compulsory. When the total is less than a dollar, the customer is offered candy, a pen or matches to make up the difference. Some shops offer credit slips, a kind of scrip that has begun to circulate here.

The story is here, and they need to issue commercial scrip.  Is anyone trusted enough to do that?


why doesn't an aid agencies send over a ship full of US pennies and nickels?

Why don't they cut the dollar bill into quarter pieces? That is still legal tender in the US by the way,

Just in case anyone thinks you are serious, a quartered dollar bill is not legal tender. ;)

The general rule of thumb is it must contain at least 3 corners and 1.5 of the 2 Serial numbers.

51% but not more than that, is what's need to get a replacement from the BE&P (they have a staff that will reassemble them).

If the Chinese let them have enough yuan, (that's a big if) that would be better - they're only worth about 10 cents, there are old fractional bills that are becoming less useful in China, and the 5% inflation is low but probably more relevant to a developing country.

Aha, finally a use for pennies. Good, ship them all to Zimbabwe.

Yeah, sounds like a sweet trade. We are awesome at making our small units worthless.

Let's give them the Canadian pennies. The Mint is taking them out of circulation anyway.

Same problem occurred in Britain in the 1800s. So some enterprising metal basher / bankers just produced and distributed their home made coins. It worked.

That's the first thing I thought of. George Selgin's book Good Money is an excellent history of the economics, personalities and technology behind this problem.

Would people trust the banker to not mint too many?

1800s Britain? Metal standard, surely.

They don't have to. If they banker makes too many people switch to his competitor' s currency.

When the total is less than a dollar, the customer is offered candy, a pen or matches to make up the difference.

When I lived in Russia (late 90's/early 2000's) this was done, usually w/ candy or gum, at a fair number of shops and little kiosks, which were very common places to buy things. It wasn't the majority of places, but was common enough. It wasn't for lack of coins in general, but a symptom of the very annoying practice of not starting the day off with sufficient change (perhaps due to fear of theft?) and so often running out. (Using a "big" bill, meaning something worth about as much as $20, was often very difficult, too- places wouldn't have enough change, and so would refuse to sell you something.)

Funny, I was thinking the same thing, except that in my experience the cashiers would not offer to give me candy but simply and rudely demand that I provide exact change to them. If I tried to buy a couple Baltikas with a 200 rouble note, they would look at me like I was crazy. And this was at virtually every store, including large chain stores in St. Petersburg and Moscow. No one ever seemed to have change, and, even if the store had it, the cashier was extremely reluctant to part with it. All of this struck me as very strange, considering that Russia was and still is a society run on cash. This also happens elsewhere in Eastern Europe, including in EU member states. It must be a cultural relic of the Soviet Union.

I had this experience in Buenos Aires, and the Argentine situation with change was discussed on this blog one time. In Buenos Aires, the bus system requires exact change, often in odd amounts, so no one wants to part with their change to be able to access the busses. Most people involved in the discussion of this blog seemed to think that this was a sufficient explanation.

Almost the opposite situation existed in Boston when it used to cost $.85 to ride the T- if you asked for change for a dollar or something at the store, people would ask you if you wanted "T change", meaning 3 quarter, 2 dimes and a nickle.

In Turkmenistan, where I was as late as 2006, the small change issue was still pervasive. The kiosk owner or bazaar worker would still give me a hard time, but eventually acquiesce. There were times when I'd wait up to 10 minutes while they ran around asking neighboring vendors for change. Of course, the first solution suggested was always, " Just buy two, you'll need it anyway, and we won't have this change problem."

I had the same experience in Mexico. It's pretty irritating, actually; the ATMs always spit out money in 500 peso (about $40) notes, which are actually really hard to spend because nobody has any change.

When all money is electronic (phones, cards) coins will be the new 'barbarous relic'

I remember an article about places using postage stamps during coin shortages. However this was a while ago, these days the amount of stamps in circulation might be too small (especially in smaller dominations less than the standard letter rate) to be useful.

Back in the pre-Euro days it wasn't uncommon for store clerks in Italy to use hard candies or similar knicknacks rather than give change of a few lire.

How about cigarettes?

Nobody has given a serious answer to babar's question "why doesn’t an aid agency send over a ship full of US pennies and nickels?" It is a very good question. On a practical level, pennies and nickels are very heavy by unit, but this country needs a solid metal coin valued at less than $1 to use for small daily transactions. The most logical coin to ship by weight is the dime. If someone knows of a legitimate charity there I would gladly box up 20 dollars worth of US dimes and mail it to them. It wouldn't weight much at all. And if it did, them batch the shipments before you sent them. It would not be that hard for an interested person or organization to get useful 10 cent coins to that country.


Interesting aid judo opportunity there. You give them a cash transfer and help out with their hard currency problem. Nice.

I think this would be an excellent opportunity for an advertising campaign / some csr plaudits. A company with sufficient good faith and credit prints low denomination note with their brand emblazoned on it. You might even make money off the whole exorbitant privilege thing here.

Why hasn't one of the bigger banks created a script coinage (freely exchangeable for bills), worth a nickel or dime. The profits from seigniorage are pretty large.

There's plenty of gold mines in Zimbabwe, and other precious metals, isn't Zimbabwe the largest miner of Platinum?. There is an opportunity for a Bank or even the BoZ to introduce something.

In Cambodia, the currency (riel) is pegged 4,000 to the U.S. dollar and both circulate and you are more likely to get dollars than riel from an ATM. If you need to buy something worth less than a dollar, riel work just fine. For larger purposes, people tend to use dollars and some stores even impose a surcharge on riel transactions. Since Zimbabwe is home to some respectable international banks, they should get government permission to print private, dollar-backed currency like this.

I'd be curious to know if the demand for coins have raised their worth above their face value anywhere.

In the late 1970's Italy had a serious shortage of small coins. Hard candies and gum were initially a common substitute, as were stamps in a plastic, coin-shaped capsule. Over time though the informal solution that emerged - rather like what bluto suggests above - were "mini assegni" - "small-format cashiers checks" - drawn on banks (often very obscure ones) with nominal values of 50 and 100 Lire. Many of these, very likely the majority, were fakes with no "real" cash value at all. That hardly mattered. Their purpose was to make retail commerce "fluid", not to act as a store of value. Since they were crudely printed on ordinary paper, they survived only a short time. Quite a few others were taken out of circulation by collectors and examples are still relatively easy to find. Since only a tiny minority were ever presented to an issuing bank, they were a very profitable instrument - if on a small scale - even when they were actually backed by a real account or a real bank. The only serious drawback was that their profitability created a vested interest in not actually getting around to fabricating conventional metal coins - something that would not ordinarily be a great problem in a country with a decent industrial infrastructure like Italy.


Given the market prices of gold and platinum, I suspect any coin that would be a fraction of a dollar in value would be too small to be practical to use. Alloying the precious metal with something else could deal with that, but would make authentication of the precious metal value more difficult.

Best use of foreign aid dollars yet:

Send all pennies to Zimbabwe.

Great Britain's late-18th and early-19th century private coins were fiduciary or token coins, rather than full-bodied ones. They were made of copper and (in the 19th century) silver, always rated at about 2x its metallic value. The coins' issuers offered to redeem quantities of them in guineas or Bank of England notes, and so guaranteed their value.

Zimbabwe's small change would necessarily also have to consist of tokens--both so as to conform to its dollar standard and because precious 'small change' would be too tiny to be of any use.

The same procedures for making and issuing such coin as worked in England during the 1790s would work in Zimbabwe today. Large retailers and banks--e.g., O.K. Zimbabwe and TM supermarkets, Standard Chartered, Stanbic, and Barclay's, could contract with coin manufacturers for custom made nickels, dimes, and quarters 9they should take a hint from Canada and forget about pennies). And as for importing the coins, that may still be an economical alternative provided the coins are sold at competitive 9cost plus) prices. It's only governments that supply small change for its face value, which of course makes importing the stuff prohibitively expensive. (In England it made counterfeits seems a bargain until the private tokens offered a legitimate alternative).

People are talking a lot about fancy digital or even paper alternatives to coins for Zimbabwe. But handled by the private sector the old-fashioned solution could work just fine. I recommend my book to those who doubt it. (I'm not sure why Tyler didn't mention it as he certainly read it.)

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