Banknotes have joined a growing list of basic items in short supply in the crisis-hit country, as inflation soars, prompting the central bank to introduce 10 million Zimbabwe dollar bills (168 pounds at the official exchange rate but only 1.68 pence on the black market).

It has also brought in new Z$5,000,000 and Z$1,000,000 bills as inflation erodes the value of lower denominations like the Z$1,000 notes which can usually be found discarded on the street. Daily cash withdrawal limits have also been raised to Z$500 million from Z$50 million.

Zimbabwe -- gripped by a severe economic crisis blamed on President Robert Mugabe's policies -- has the highest inflation rate in the world at nearly 8,000 percent.

Its people need huge sums of money to carry out simple transactions and bank note shortages set in last November, reaching a peak over the Christmas holiday.

Only last month, central bank governor Gideon Gono brought in new Z$750,000, Z$500,000 and Z$250,000 notes which however fell short of ending the cash crisis.

This week Gono, who blames thriving black market trade for the crunch, said high inflation and frequent wage hikes had also increased demand for cash and promised the bank would keep currency in circulation at levels in line with price changes.

On Friday long customer queues persisted at retail banks in central Harare, even as they started dispensing the new notes and relaxed strict cash rationing.

SHORT-TERM SOLUTION

"The only change is that we have been assured by bank officials we will get our money," said Hendrix Munangati as he waited to be served. "But we still have to queue."

Economic analysts say while the new measures might clear the queues in the short term, government needs to revamp its policies to rescue the economy.

"Shortages will ease for now, but this is just one symptom of a serious malady that has to be addressed," independent economic analyst Nhlanhla Nyathi told Reuters.

"As long as the authorities are in denial about inflation, we are not going to see a lasting solution, apart from regular bursts of money printing," he said, adding the local dollar was likely to weaken further on the black market, where most firms are forced to source scant foreign currency.

"Prices will inevitably rise in tandem, so the root cause of the economic crisis has to be addressed," Nyathi said.

Once one of the continent's brightest hopes, Zimbabwe has seen its economy shrink by over 40 percent since 2000, when Mugabe's government seized white-held commercial farms to resettle landless blacks.

Mugabe, 83 and in power since independence from Britain in 1980, denies mismanaging the economy, which he says has been undermined by Western nations opposed to his land reforms.