Hyperinflation in Zimbabwe

Hyperinflation in Zimbabwe describes the ongoing situation of hyperinflation in Zimbabwe. Since the early years of the 21st century the Zimbabwe dollar has experienced drastic devaulation.

Historical context

On 18 April 1980 when the new sovereign independent republic of Zimbabwe was born from the former British colony of Rhodesia the Rhodesian Dollar was replaced by the "Zimbabwe dollar" at par.
The Zimbabwean Dollar was worth about 1.59 United States dollars [ [http://www.union-network.org/uniindep.nsf/863b5ce2fa055934c1256800002e5ab0/a98a30748a5bf10dc1256aa0001e434c?OpenDocument UNI : Zimbabwe: Hell for Locals, Paradise for Those With Forex ] ] [Charles Rukuni. "Zimbabwe: Hell for Locals, Paradise for Those With Forex". Bulawayo :Union Network International http://www.union-network.org] . Since the introduction of land reforms in the early 1990's and international sanctions on Zimbabwe by western countries, hyperinflation and the collapse of the Zimbabwean economy have severely devalued the Zimbabwean Dollar. Critics of president Robert Mugabe blame his land reform policies focused on taking land from white farmers and redistributing it to blacks; they argue that the principal reason that food production has been plummeting is that the new owners lack the knowledge or means to farm productively. [ [http://www.news24.com/News24/Archive/0,,2-1659_1401988,00.html Zimbabwe famine] ] [Greenspan, Alan. "The Age of Turbulence: Adventures in a New World". New York: The Penguin Press. 2007. Page 339.] However, the Zanu-PF government and its supporters maintain that this economic collapse is a result of the international sanctions targeting a few government ministers and companies loyal to the government such as ZDERA by the US, the EU and Australia, which they call "illegal" - without specifying under what statute they are illegal - and claim are directly harmful to the economy. [ [http://zimbabwe-image.blogspot.com/2007/09/illegal-sanctions-to-blame-for-economic.html Illegal Sanctions to Blame for Economic Challenges - Mutasa] "The Herald (Harare)"]

Early 21st century

Early in the 21st century Zimbabwe started to experience hyperinflation. Inflation reached 624 percent in early 2004, then fell back to low triple digits.

2006

On 16 February 2006, the governor of the Reserve Bank of Zimbabwe, Dr. Gideon Gono, announced that the government had printed ZWD 21 trillion in order to buy foreign currency to pay off IMF arrears.

In early May 2006, Zimbabwe's government began printing money again to produce about 60 trillion Zimbabwean dollars. The additional currency was required to finance the recent 300 percent increase in salaries for soldiers and policemen and 200 percent for other civil servants. The money was not budgeted for the current fiscal year, and the government did not say where it would come from.

In August 2006, the Zimbabwean government issued new currency and asked citizens to turn in old notes; the new currency (issued by the central bank of Zimbabwe) had three zeroes slashed from it. Most financial analysts remained skeptical and said that the new money would not provide relief from record inflation. [cite news |url=http://news.yahoo.com/s/afp/20060806/ts_afp/zimbabweeconomybankmoneyinflation |title=Zimbabwe's 'cosmetic' cash reforms rapped |date=2006-08-06 |archiveurl=http://web.archive.org/web/20060827074341/http://news.yahoo.com/s/afp/20060806/ts_afp/zimbabweeconomybankmoneyinflation |archivedate=2006-08-27]

2007

In February 2007, the central bank of Zimbabwe declared inflation "illegal", outlawing any raise in prices on certain commodities between March 1 and June 30, 2007. Officials have arrested executives of some Zimbabwean companies for increasing prices on their products. Such measures, frequently tried during other episodes of hyperinflation, have always failed. [ [http://www.nytimes.com/2007/02/07/world/africa/07zimbabwe.html?ex=1328504400&en=5709ec03b6b62b0d&ei=5090&partner=rssuserland&emc=rss As Inflation Soars, Zimbabwe Economy Plunges - New York Times ] ] [ [http://news.bbc.co.uk/2/hi/africa/6199516.stm BBC NEWS | Africa | Zimbabwe jail over bread prices ] ]

In March 2007, inflation surged to a new high of 1,730 percent, and in June the government released a figure of 7,638 percent. [ [http://news.bbc.co.uk/2/hi/business/6959164.stm BBC NEWS | Business | Zimbabwe inflation hits new high ] ] The predictions for the annual inflation ranged from 3,000 percent (according to the IMF) to 8,000 percent. [ [http://www.economist.com/displayStory.cfm?story_id=9122679&fsrc=RSS Thank oil | Economist.com ] ] In fact, inflation that month rose to 11,000 percent from an earlier estimate of 9,000 percent. U.S. ambassador Christopher Dell predicted it would reach 1.5 million percent by December 2007, [ [http://news.bbc.co.uk/2/hi/africa/6229284.stm BBC NEWS | Africa | US says Zimbabwe change is afoot ] ] although in the event the IMF estimated a rate of "only" 115,000 percent for that month, and 150,000 percent for January 2008. [ [http://allafrica.com/stories/200801180772.html allAfrica.com: Zimbabwe: IMF Estimates Inflation At 150 000 Percent] ] The government then circulated a Z$200,000 note, [ [http://news.bbc.co.uk/2/hi/business/6924062.stm BBC NEWS | Business | Zimbabwe launches $200,000 note ] ] and reports of extreme shortages of basic foodstuffs, fuel, and medical supplies abounded. [ [http://www.nytimes.com/2007/08/02/world/africa/02zimbabwe.html?_r=1&oref=slogin Caps on Prices Only Deepen Zimbabweans’ Misery - New York Times ] ] [ [http://www.cnn.com/2007/WORLD/africa/07/31/zimbabwe.prices.reut/ IMF: Zimbabwe's inflation could reach more than 100,000 percent - CNN.com ] ] The government instituted a six-month freeze on wages on September 1, 2007. [ [http://select.nytimes.com/gst/abstract.html?res=F40F10FE3F5A0C728CDDA00894DF404482 Freeze on Wages Is Latest Step to Stanch Inflation in Zimbabwe] , NY Times, September 1, 2007.]

2008

The Reserve Bank of Zimbabwe issued a ZWD 10,000,000 note in January 2008, roughly equivalent of 4 US dollars. [ [http://www.dailymail.co.uk/pages/live/articles/news/worldnews.html?in_article_id=508840&in_page_id=1811 Zimbabwe bank issues Z$10 million] , Daily Mail, January 19, 2008.] Zimbabwe's inflation soared to a record high of 26,470.8 percent as the economy contracted by 6 percent, the central bank said. [ http://web.archive.org/web/20080204182310/http://zwtimes.com/pages/inflation183.17686.html ]

In April 2008 the Reserve Bank of Zimbabwe issued a ZWD 50,000,000 note, which was then worth approximately 1.20 US dollars. [ [http://economictimes.indiatimes.com/Inflation__100000_pc_50_mn_Zimbabwean_dollar_is_1_US_dollar/articleshow/2926846.cms 50 million Zimbabwean dollar is one US dollar- International Business-News-The Economic Times ] ] In May 2008 the Reserve Bank of Zimbabwe issued bank notes or rather "bearer cheques" to the value of ZWD 100 million and ZWD 250 million. [ [http://economictimes.indiatimes.com/Zimbabwe_issues_250_mn_dollar_banknote_to_tackle_price_spiral/articleshow/3015531.cms Zimbabwe issues 250 mn dollar banknote to tackle price spiral- International Business-News-The Economic Times ] ] . Meanwhile inflation had surged to an estimated 165,000 percent [ [http://allafrica.com/stories/200804031050.html allAfrica.com: Zimbabwe: Inflation Surges to 165 000 Percent] ] with some unconfirmed reports putting the figure as high at 400,000 percent. Ten days later, new notes with a value of ZWD 500 million (then equivalent to about USD 2) were issued. [ [http://news.bbc.co.uk/1/hi/world/africa/7402943.stm BBC NEWS | World | Africa | Zimbabwe bank issues $500m note ] ] The US ambassador to Harare projected that inflation would soar to 1.5 million percent by the end of 2008.

By the beginning of July 2008, official figures put the inflation rate at 355,000 percent [ [http://www.zimbabwesituation.com/may17_2008.html#Z22 The Zimbabwe Situation ] ] and with some independent estimates as high as 8,500,000 percent. [ [http://www.timesonline.co.uk/tol/news/world/africa/article4258492.ece Zimbabwe: 'We are all billionaires who can afford nothing.That is why I hate that old man'] The Times, July 3 2008] By July 4th, 2008 at 5PM, a bottle of beer cost $100 billion Zimbabwean dollars, but an hour later, the price had gone up to $150 billion; the Los Angeles Times further reported on July 15th, 2008 that the printing presses were running out of paper to print the money, and it was feared that because of human rights concerns, Germany would cut off the supply of paper and the software license for creating designs for ever higher denominations of currency. [ [http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/15/MNR011OT0Q.DTL&type=printable Zimbabwe soon won't be able to print money] Los Angeles Times, July 15 2008] On July 16, the official inflation rate was reported by Zimbabwe's central bank as 2.2 million percent. [ [http://www.guardian.co.uk/world/2008/jul/16/zimbabwe Zimbabwe inflation soars to 2.2m%] The Guardian, July 16 2008]

On 19 July, 2008, the Reserve Bank of Zimbabwe announced plans to introduce a Z$100 billion bank note. [ [http://news.bbc.co.uk/1/hi/world/africa/7515823.stm Zimbabwe introduces Z$100bn note] BBC News, July 19 2008]

On July 30 2008, the Governor of the RBZ, Gideon Gono announced that the Zimbabwe dollar would be redenominated by removing 10 zeroes, with effect from August 1 2008. ZWD10billion will become 1 dollar after the redenomination. cite news|url=http://news.bbc.co.uk/1/hi/world/africa/7532702.stm|title=Zimbabwe introduces new currency |publisher="BBC"|date=July 30, 2008|accessdate=2008-07-30]

On August 19, 2008, official figures announced for June estimated inflation of over 11,250,000 percent (i.e., prices doubling every 22 days). [ [http://news.bbc.co.uk/2/hi/business/7569894.stm Zimbabwe inflation rockets higher] BBC News, August 19 2008]

Official statistics reported in October put Zimbabwe's annual inflation in July 2008 at 231 million percent. The annual rate of price growth was 11.2 million in June. The Central Statistical Office stated that it therefore gained 219.8 million percentage points. [cite web |url=http://news.yahoo.com/s/afp/20081009/wl_africa_afp/zimbabweeconomyinflation |title=Zimbabwe inflation soars to 231 million percent |publisher=Yahoo! News |author=Fanuel Jongwe |date=2008-10-09 |accessdate=2008-10-10] [cite web |url=http://allafrica.com/stories/200810090256.html |title=Zimbabwe: Inflation Soars to 231 Million Percent |publisher=allAfrica.com / The Herald (Harare) |author=Martin Kadzere |date=2008-10-09 |accessdate=2008-10-10] [ [http://news.bbc.co.uk/1/hi/world/africa/7660569.stm Zimbabwe inflation hits new high] BBC News, October 9 2008]

The Cato Institute's Senior Fellow Steve Hanke released a document estimating Zimbabwe's annualized inflation rate to be 2,000,000,000,000% as of October 3, 2008. [http://www.cato.org/zimbabwe New Hyperinflation Index (HHIZ) Puts Zimbabwe Inflation at 2 Trillion Percent] (Accessed 2008-09-04)]

References