The "Zimdollar:" Dead, but still used for bus fare

In the August 16, 2009 article "The `Zimdollar´: Dead, but still used for bus fare" Associate Press writer Angus Shaw reports that hyperinflation has had a devastating effect on the value of Zimbabwe's currency:

HARARE, Zimbabwe – A woman pays her bus fare with 3 trillion in old Zimbabwe dollars — the equivalent of 50 U.S. cents. The collector accepts the brick of neatly folded bundles of a trillion each without bothering to count the notes.

"No one seems to worry, and it works," said the woman, Lucy Denya, a Harare secretary who says she's seen police officers using old notes to board buses.

The Zimbabwe dollar is officially dead. It was killed off in hopes of curbing record world inflation of billions of percentage points, and Zimbabwe has replaced it with the U.S. dollar and the South African rand.

Yet the role of the old Zimdollar, as it is known, remains in flux. It is still used, and has become another point of contention for the divided leadership of the country, now one of the poorest in the world.

President Robert Mugabe has called for the return of the Zimdollar as legal tender, complaining that most Zimbabweans lack the hard currency needed to buy basic goods. The central bank under governor Gideon Gono, a Mugabe loyalist, has acknowledged printing extra local money to fund government spending that fueled inflation.

But Finance Minister Tendai Biti, who joined the government as part of a power-sharing agreement between his Movement for Democratic Change and Mugabe's ZANU-PF party, has declared the local dollar indefinitely obsolete. He has threatened to quit if a return to the local currency is forced upon him.

"We are putting the tombstone on the corpse of the Zimbabwe dollar," Biti told lawmakers in a midyear fiscal policy statement. In a speech to business leaders, he said, "We are no longer printing our own money."

Biti said monthly inflation rose slightly in June to 0.6 percent, up from zero the month before. He blamed the rise on price hikes in property rentals, gasoline and other nonfood items. He also noted that GDP per capita has plunged from $720 in 2002 to $265 last year, reflecting the shortage of hard cash in the economy.

That shortage is not helped by the state of the global economy, on which Zimbabwe depends.

With the collapse of the country's agricultural economy after the seizure of thousands of white-owned farms beginning in 2000, an estimated 4 million Zimbabweans — many of them skilled — left the country to find jobs in neighboring South Africa and further afield. The so-called "diaspora dollar" became by far the nation's biggest source of hard currency.

But in the global recession, those inflows are diminishing, bankers say. In a typical case, a businessman's daughter in Britain e-mailed him in June that she was halving her monthly remittance of $400.

The independent Zimbabwe National Chamber of Commerce blamed acute shortages of hard currency on payments to buy imported basic goods previously manufactured in Zimbabwe, such as soap and cooking oil from South Africa.

Without enough cash no matter how they cut it, Zimbabweans survive on a mish-mash of currencies.

All the bus drivers can do with Zimdollars is give them back to other passengers in change for American bills. In one reported incident, a passenger pulled a gun on a bus driver who insisted on paying change in local notes.

Outside the cities, where hard currency can be hard to come by, Zimbabwe dollars are used like promissory notes in small transactions. And trillion Zimbabwe dollar notes, the world's biggest denomination bills, are a hit with collectors, selling briskly on eBay. In Zimbabwe, they change hands like tokens or IOUs.

Stores without small change in hard currency don't offer obsolete Zimbabwe dollars in change like the bus drivers do, but routinely provide candies and chocolate bars or "coupons" handwritten on check-out slips to be redeemed on future purchases.

Irene Gwata, owner of a small trading store in rural northwestern Zimbabwe, said hard currency has stopped filtering down to her customers in recent weeks. Locals trade goat meat, chickens and pails of corn for goods, she said.

She saw a village woman board a bus and pay with a live chicken trussed in wire for the 150-kilometer (90-mile) trip to Harare.

With characteristic Zimbabwean humor in adversity, Gwata said, "people wanted to know if she was going to get eggs for change."

Zimbabwe hyperinflation 'will set world record within six weeks'

A 13 November 2008 article in United Kingdom´s Telegraph newspaper claimed:

Inflation levels in Zimbabwe are running at 13.2 billion per cent a month and could reach an all-time world record within weeks.

The latest figures put the country's annual rate at 516 quintillion per cent – 516 followed by 18 zeros – overtaking Yugoslavia in 1994 and putting it behind only Hungary in 1946.

With goods unavailable and official statistics widely distrusted, the Cato Institute in Washington calculated the figures based on exchange rate movements and market data.

In post Second World War Hungary monthly inflation reached 12,950,000,000,000,000 per cent, with prices doubling every 15.6 hours – Zimbabwean prices are currently doubling every 1.3 days.

The most famous hyperinflation, Weimar Germany in 1923, is in a distant fourth place, at 29,525 per cent a month with prices doubling every 3.7 days.

Prof Steve Hanke said: "They still have a way to go to catch Hungary, but they are getting there. This is conjecture, but if they keep going at this pace, they have a shot at it within a month or maybe a month-and-a-half at the outside."

For ordinary Zimbabweans, the consequences are appalling and they must spend money as soon as they get it before it loses its value.

But the dysfunctional economy means that goods are in desperately short supply, and they must spend hours foraging to find things to buy.

There comes a point, though, where the inflation rate makes little practical difference.

"The economy just stops functioning or slows down very much," said Prof Hanke. "A lot of barter takes place. Money is not used as much or if it is, it's all foreign exchange." Supermarkets in Harare are accepting only US dollars and South African rands, leaving those Zimbabweans without access to foreign currency in dire straits.

The latest official figure for inflation in Zimbabwe – dating back to July – is 231 million per cent a year. Robert Mugabe's government blames foreign sanctions for the economic turmoil.

Prof Hanke said the only way to stop the rise was to abolish the Reserve Bank of Zimbabwe – which is a key tool of the regime.

"At the end of the day, people will just refuse to use the money. It will be just worthless and the Reserve Bank will be useless too. The only way you can change expectations about inflation in hyper-inflating countries is completely get rid of the old system."

Announcing a range of measures this week, that only tinker with symptoms of the problem, Gideon Gono, the governor of the reserve bank, blamed a “breed of selfish and unrelenting money launderers and speculators” for the crisis.

“The nation has to appreciate the magnitude of the 'sanctions’ and the mightiness of the enemies who are at play in order to understand that we are at war,” he said.

For years, analysts and opposition politicians have predicted that the economy would prove to be Mr Mugabe's downfall, but Prof Hanke, who is professor of applied economics at Johns Hopkins University, said that Slobodan Milosevic survived for almost eight years in Yugoslavia after hyperinflation peaked.

"The idea hyperinflation is going to blow Mugabe out of there isn't based on historical experience.

"Milosevic and Mugabe are similar in more ways than one: the restrictions on liberty of all sorts; Milosevic carrying on just like Mugabe that it was the foreign sanctions that were ruining the economy. It's very similar."

http://www.telegraph.co.uk

Zimbabwe inflation passes 100,000%, officials say

A February 22, 2008 article by Associate Press writer Angus Shaw highlighted the hyperinflation in Zimbabwe:

The official rate of annual inflation in Zimbabwe has rocketed past the 100,000% barrier, by far the highest in the world, the state central statistical office said yesterday. Second-placed Iraq has inflation of 60%, according to international estimates.

In a brief statement, the statistics office said inflation rose to 100,580% in January, up from 66,212% in December.

The new official figure was still well below the rate calculated by independent analysts. They estimate the real inflation is closer to 150,000%, citing supermarket receipts showing that the price of chicken rose more than 236,000% to 15m Zimbabwe dollars a kilogram between January 2007 and January 2008. Slower increases in prices of sugar, tea and other basics bring down the average to around 150,000%.

Zimbabwe, a former regional breadbasket, is facing acute shortages of food, hard currency, gasoline and most basic goods in an economic meltdown blamed on disruptions in the agriculture-based economy after the seizures of thousands of white-owned commercial farms began in 2000, accompanied by political violence and turmoil.

Economic hardship is a key issue in national elections scheduled for March 29 in which President Robert Mugabe, who turns 84 on Friday, is facing the biggest challenge to his hold on power since he led the nation to independence in 1980.

Inflation, food shortages and the crumbling of power, water, sanitation, roads, phones and communications and other utilities have fuelled deep divisions in the ruling Zanu-PF party.

In early October the state central statistical office gave official inflation at just below 8,000%. It then suspended its monthly updates because there was not enough in the shortage-stricken shops to calculate a regular basket of goods.

November's already dizzying rate of 24,470% was announced in January and earlier this month the official rate for December was given as 66,212%, a dramatic escalation in the space of a month.

The National Incomes and Prices Commission, the government's price control body, this month allowed sharp increases in the prices of the corn meal staple, sugar, bread and other basics in a bid to restore viable operations by producers and return the goods to empty shelves.

But the new prices were still roughly half the price demanded on the black market and were unlikely to guarantee regular supplies to food stores.

Executives at a milling company producing corn meal said the price increase allowed by the government was already overtaken by soaring production costs and gasoline prices and the National Bakers Association said bread shortages were set to worsen unless the price of a loaf was nearly doubled to more than 5m Zimbabwe dollars for a regular loaf.

Gross domestic product in Zimbabwe fell from about $200 in 1996 to about $9 a head last year.

Zimbabwe inflation now over 1 million percent

A May 21, 2008 article by Associate Press writer Angus Shaw says the hyperinflation in Zimbabwe is escalating:

HARARE, Zimbabwe --Weary Zimbabweans are facing a new wave of price increases that will put many basic goods even further out of their reach: A loaf of bread now costs what 12 new cars did a decade ago.

Independent finance houses said in an assessment Tuesday that annual inflation rose this month to 1,063,572 percent based on prices of a basket of basic foodstuffs. Economic analysts say unless the rate of inflation is slowed, annual inflation will likely reach about 5 million percent by October.

As stores opened for business Wednesday, a small pack of locally produced coffee beans cost just short of 1 billion Zimbabwe dollars. A decade ago, that sum would have bought 60 new cars.

And fresh price rises were expected after the state Grain Marketing Board announced up to 25-fold increases in its prices to commercial millers for wheat and the corn meal staple.

The economy was on shop clerk Jessica Rukuni's mind as she left the public swimming pool in downtown Harare's central park with three disappointed children. She found the new admission price of 100 million Zimbabwe dollars -- 30 U.S. cents -- out of reach.

"The point is that it's far too much for most people who don't get U.S. dollars," she said.

Her income is the equivalent of about one U.S. dollar a day, and her family has one basic meal daily.

The collapsing economy was a major concern of voters who dealt longtime President Robert Mugabe a defeat in March 29 elections. His challenger, Morgan Tsvangirai, topped the poll but did not win the simple majority needed to avoid a runoff. The two face each other in a second round June 27.

Mugabe was to officially launch his runoff campaign with a rally at his party's headquarters in Harare on Sunday, the state-run Herald newspaper reported Wednesday.

The opposition's campaigning has been hampered by violence blamed on Mugabe's government and party. The opposition claims Tsvangirai is the target of a government assassination plot and he has been out of Zimbabwe since shortly after the March 29 first round. He plans to return to Zimbabwe to campaign for the runoff once security measures are in place, his aides have said.

Mugabe, speaking as he reviewed graduating police cadets Wednesday, said the opposition was fanning violence. Independent observers have said that while there have been some retaliatory attacks by the opposition, the vast majority of the attacks have been carried out by Mugabe supporters.

Mugabe accuses the United States, the European Union and especially former colonial ruler Britain of using their economic influence to back his opponents and bring about his ouster. He has severed ties with the International Monetary Fund, the World Bank and other financial organizations.

Zimbabwe's official annual inflation was given by the government as 165,000 percent in February, already by far the highest in the world. The government has not updated that -- the state statistical service has said there were not enough goods in the shortages-stricken shops to calculate new figures.

The economic decline has been blamed on the collapse of the key agriculture sector following the often violent seizures of farmland from whites. Mugabe claimed the seizures begun in 2002 were to benefit poor blacks, but many of the farms went to his loyalists.

"The crunch is going to come when local money is eroded to the point it is no longer acceptable" in commercial activities or as earnings, especially by longtime ruler Mugabe's loyalists, said independent Harare economist John Robertson.

Already, more transactions are being done in U.S. dollars, both openly and in secret.

Manufacturing industries, running at below 30 percent of their capacity, reported growing absenteeism by workers facing soaring commuter bus fares.