How Ivory Coast's Gbabgo aims to solve his cash woes

ATMs, check cashiers, and Western Union have all reportedly run out of cash in Ivory Coast, a heartbreak for nervous Ivorians in long lines.

Half a week into new negotiations over how the two men claiming to be president of Ivory Coast can share power, the political future of the country remains as murky as ever. Yet the spiral staircase downward couldn't be more clearly laid out for West Africa's second-largest economy and the 21 million people trapped in it.

Elections three months ago were meant to restore the country's biggest city, Abidjan, as the financial capital of the Francophone tropics. But today Ivory Coast finds itself something like an unplugged ATM with no money in the tank and a surrounding mob of goons still trying to screwdriver their way in.

How did that happen? Mostly because the country's currency is printed abroad. When incumbent President Laurent Gbagbo refused to cede power after losing the Nov. 28 presidential election, the Senegal-based Central Bank – which moves that money from the mint through the loan window into the hands of bankers and then customers – abruptly stopped sending cash over.

With no new currency flowing in, and a torrent of money being yanked out of banks by anxious customers, the country's financial institutions began emptying their registers.

ATMs, check cashiers, and Western Union have all reportedly run out of cash, a heartbreak for nervous Ivorians in long lines.

Several of the country's top banks have totally ceased operations, so troops loyal to Laurent Gbagbo have "nationalized" – the opposition says "robbed" – those lenders. Gbagbo's troops have also "requisitioned" – again, their words – whatever cash was left in the Central Bank's Abidjan bureau.

Even the city's stock exchange, now shuttered, received a visit from the econ police.

"They asked us for cash, as if we keep sacks of money lying around in a stock exchange," a local trader told Time Magazine.

And that could just be the beginning. If it is, here's what could come next for a country that seems to be slipping toward a relapse to civil war.

1. Opening day at the Bank of Gbagbo

When Gbagbo's government nationalized the country's failing banks, his government proposed re-opening them as soon as last Monday.

"It remains to be seen whether this can be implemented in practical terms given that financial institutions are short of cash and will still be unable to perform basic inter-bank transactions," financial analyst Samir Gadio wrote in an e-mailed analysis.

After all, it's not like Ivory Coast's shuttered banks suffered bad leadership, spent too much money on bonuses or office rugs, or overexposed their shareholders to subprime housing loans. The banks lacked for money, not management.

2. Double-digit inflation while money disappears

"We also continue to think that inflation will soon be in double-digits," Mr. Gadio adds, offering a conundrum: Even as money becomes more cherished, it becomes more worthless.

That's partly because the country is running out of the things money buys even faster than it's running out of money.

Basic needs like cooking gas have become rarities in this country that has never knows the kind of week-long commodity shortages that routinely rock the West African neighborhood.

"Essential commodities," Eurasia Group's Africa analyst Anne Fruhauf says, "are fast becoming unaffordable."

3. How long will Gbagbo pay soldiers' salary?

Gbagbo's mission amid the macroeconomic math storm afoot is to make sure those essential commodities don't become unaffordable for his soldiers.

His government owes a monthly wage bill of $160 million. There's no slice of it more important than wages for the troops who keep Gbagbo in power – and his opponent barricaded in an Abidjan hotel.

Their payments are made by check – another scrap of hollow paper in this country of closed banks and empty drawers.

Even if they were delivered via scrumptious, envelope-sealed cash, it's hard to reckon how Gbagbo can scrounge together the salaries, as the country's main revenue source, cocoa exports, suffers from an international export ban.

"If salary payments don’t clear this month, the risk to his support base within the wider Civil Service and Army will begin to wear thin," Ms. Fruhauf says. "As we are already beginning to see, this severely raises the risk of street violence in the interim."

4. The birth of a new bill

Shunned by the bankers who print its currency, and surrounded by a praetorian guard with a payday coming, Gbagbo's best and boldest move may be to fire up the laser-jets and print new money from scratch.

Ergo, meet La Monnaie Iviorienne de la Resistance. Pale, wallop-sized "resistance currency" emblazoned with stuff like elephants, the bills come in units of hundreds today, but maybe hundreds of thousands tomorrow.

Gadio calls the pending bill "a practical option for Gbagbo's government," except that the new banknote and its elephant gewgaw "would also result in an hyperinflation spiral and make the new unit worthless."

It could also rupture new fault lines between hard-liners and moderates in the Gbagbo camp.

Why? Because, as a rule, elite government leaders who keep their bank accounts in a currency pegged to the euro, as Ivory Coast's currency is, don't like to convert their life savings into a banknote that, for the moment, primarily exists only on Google Image search.

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