Hyperinflation in Zimbabwe

From Wikipedia, the free encyclopedia

v • d • e Zimbabwean inflation rates (official) since independence
Date	Rate	Date	Rate	Date	Rate	Date	Rate	Date	Rate	Date	Rate
1980	7%	1981	14%	1982	15%	1983	19%	1984	10%	1985	10%
1986	15%	1987	10%	1988	8%	1989	14%	1990	17%	1991	48%
1992	40%	1993	20%	1994	25%	1995	28%	1996	16%	1997	20%
1998	48%	1999	56.9%	2000	55.22%	2001	112.1%	2002	198.93%	2003	598.75%
2004	132.75%	2005	585.84%	2006	1,281.11%	2007	66,212.3%	2008	11,268,758.9%

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^[1][2]. 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.^[3][4] However, the Zanu-PF government and its supporters believe 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.^[5]

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

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.^[6]

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.^[7][8]

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.^[9] The predictions for the annual inflation ranged from 3,000 percent (according to the IMF) to 8,000 percent.^[10] 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,^[11] although in the event the IMF estimated a rate of "only" 115,000 percent for that month, and 150,000 percent for January 2008.^[12] The government then circulated a Z$200,000 note,^[13] and reports of extreme shortages of basic foodstuffs, fuel, and medical supplies abounded.^[14][15] The government instituted a six-month freeze on wages on September 1, 2007.^[16]

The Reserve Bank of Zimbabwe issued a ZWD 10,000,000 note in January 2008, roughly equivalent of 4 US dollars.^[17] Zimbabwe's inflation soared to a record high of 26,470.8 percent as the economy contracted by 6 percent, the central bank said.^[18]

In April 2008 the Reserve Bank of Zimbabwe issued a ZWD 50,000,000 note, which was then worth approximately 1.20 US dollars.^[19] 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.^[20]. Meanwhile inflation had surged to an estimated 165,000 percent ^[21] 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.^[22] 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^[23] and with some independent estimates as high as 8,500,000 percent.^[24] 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. ^[25] On July 16, the official inflation rate was reported by Zimbabwe's central bank as 2.2 million percent.^[26]

On 19 July 2008, the Reserve Bank of Zimbabwe announced plans to introduce a Z$100 billion bank note.^[27]

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. ^[28]

On August 19, 2008, official figures announced for June estimated the inflation over 11,250,000 percent (Price doubling every 22 days). ^[29]

[edit] References