The Zaire Government has taken Milton Friedman’s fashionable ideas on monetarism to a crude extreme. It has tried to halt rampant inflation by halving the money in circulation. Such monetaristbungling has, as usual,left the poor as losers.
In December last year the government froze the country’s bank accounts and gave the population five days to change all high denomination notes in their possession. But now businesses, banks and thousands of individuals are also licking their wounds and counting their losses.
An official with a large international bank recently described the situation as ‘desperate’, with even major companies having to pay salaries partly in cash and partly into still blocked bank accounts.
The bank account freeze stopped holders from withdrawing more than 10 per cent of their deposits. It was the first move in a crash programme to counter the country’s chronic inflation, which for years has been stoked by the Government’s policy of simply printing money in order to meet its budgetary deficit. Aiming to reduce the circulation of one billion Zaires - the currency of the country - to between 300 and 400 million, the government sealed the country’s borders and announced that people had five days in which to change all the five and ten Zaire notes in their possession for new notes. (One Zaire was then officially worth about 50 cents). Limits were imposed of 3,000 Zaires for individuals, and between 5,000 and 20,000 for businesses depending on size.
What followed was total confusion. Even within the restrictions there were far too few new notes available to meet demand and most of the banks ran out of new notes before the five days was up. Politically powerful groups and individuals are thought to have had prior warning and taken precautions, but with only nine banks to serve the whole of the capital, Kinshasa, tens of thousands of people never made it to the tellers’ desks. Many of those who did fight their way through the long queues had to contend with army guards at the entrances demanding payment to let them through. One eye-witness reports: I myself saw the military controlling the crowds, taking money to let people through and then going in at the end of the day to change their own takings.
People in the rural areas were hardest hit and losses to missions were reported to be colossal. One Swedish Protestant mission, which had been acting as banker for peasants over a wide area arrived out of the bush three days too late with 900,000 Zaires. In at least two of the smaller towns banks were stormed by angry peasants demanding that their money be changed. But otherwise there has been remarkably little violence with most people in a state of anxious resignation. The people in the bush have lost virtually everything, writes one local informant.
After the initial five days the banks reopened for. a further week to give people who had not managed to meet the deadline a chance to deposit money up to the limits with a promise it would be changed at a later date. Some bank notes were stamped by the banks and returned to the owners in the absence of any new notes to replace them with. Most of these deposits and notes had still not been changed by the beginning of March.
Businesses have continued to tick over on the basis of cheque transfers on the assumption that the money can be cashed eventually. But most companies have too little cash to meet their wages bills and a string of customers with no money to pay for their goods.
In the rural areas the prices of local produce and artifacts have dropped by as much as 50 per cent. This is because the people have lost all their savings and are having to sell in a low-demand market to pay for soap, salt and other essentials. On top of this they must still meet education and medical costs and pay their taxes. Meanwhile the inflation continues.