A man holds a new 200,000 Zimbabwean dollar note in Harare, Thursday, August 2. The note is being phased out and larger denominations introduced in January.

Zimbabwe's central bank on Wednesday announced the introduction of higher denomination of banknotes to help end a cash crunch that has seen people besieging banks.

Central bank governor Gideon Gono said in a televised speech that the Z$200,000 bill - currently the highest value note and equivalent to $6.66 at the official rate and $0.12 on the widely used black market - would be phased out by January 1.

Gono said higher-value Z$750,000, Z$500,000 and Z$250,000 bills would start circulating on Thursday in an attempt to end cash shortages that have forced some people to sleep outside banks in the hunt for cash amid a severe economic crisis blamed on President Robert Mugabe's policies.

Critics say the new banknotes will do little to address the causes of Zimbabwe's economic slide, which include the world's highest inflation rate, acute shortages of foreign currency, food and fuel, and unemployment of nearly 80 per cent.

Gono said the Z$200,000 note was the most used by illegal dealers.

Cash shortages

He said individual depositors would not be allowed to bank more than Z$50 million and any excess funds would be forfeited to the government. All banks would from Thursday be manned by government officials to monitor cash deposits.

"The cash shortages will be a thing of the past. Within the next few days there will be sufficient cash to go about our business," Gono said.

Tempers have been fraying more than usual in recent days as Zimbabweans have crowded into banks in search of cash, which is in short supply ahead of the Christmas holiday.

- Reuters