A Worthless

Currency :
Hyperinflation
in Zimbabwe

Piyush Sawant | Shikahar Pant

Harsh Sinha | Tanmoy Adhikari

 Zimbabwe
- Zimbabwe African National Union Patriotic
Front (ZANUPF)
- Unitary Dominant Party Presidential Republic
Government
- GDP Estimate (2017): $15.285 Billion
- Labour Force: 5.634 million
- Main Industries: Mining, Wood Products & Cement

-
What happened in 2008 ?

Inflation rate: 11.2 million

percentage points

2nd Highest recorded

hyperinflation in history

94% Unemployment

$422 per capita GDP

Debt: 108% of GDP

1 loaf of bread costed 10 million

Zimbabwe dollars
 Timeline of Events

1980 1987 2000 2001 2005 2009

Robert publicly
Mugabe Robert Purchasin
becomes Recession acknowled Foreign
Prime Mugabe begins ges g power
currency
Minister becomes economic equal to
introduced
President crisis that of
1953
 Reasons for the Crisis

Change of interests in farming system that warrant study

Land reforms

Payments to War veterans

Congolese war intervention

Economic Sanctions
Land Reforms

Around 7 million hectares of land redistributed via the land reform (or 20% of
Zimbabwe's area), 49.9% of those who received land were rural peasants, 18.3%
were "unemployed or in low-paid jobs in regional towns, growth points and mines,"
16.5% were civil servants, and 6.7% were of the Zimbabwean working class.
Impact of land reform program over the years:
- The annual wheat production which was once stands at 300,000 tonnes in 1990
plummeted to 50,000 in 2007.
- The tobacco industry, which was Zimbabwes single largest generator of foreign
exchange and accounted for almost a third of Zimbabwes foreign exchange earnings
in 2000, has almost completely collapsed.
- The crop that earned some US$600 million in 2000 generated less than US$125
million in 2007.
 Congolese War Intervention

In the middle of Zimbabwe's worst economic crisis since independence in 1980,

President Robert Mugabe's government was reported to be spending millions of
dollars each month on the war.
Zimbabwe does not share a common boundary with the DR Congo, and is under
no strategic threat from within the country.
Zimbabwe announced joint business ventures with DR Congo including diamond
and gold dealing, to add to the war chest of both countries.
Both the land and the diamond ventures require initial funding of about $50m,
money which the Congolese and Zimbabwean authorities can ill-afford.
Meanwhile, military spending emptied the public purse.
 Economic Sanctions

As indicated by IMF reports, the budget deficit, including grants, remained at 10.0
percent of evaluated GDP in 2006.
This figure is over triple the figure of 3.0 percent of GDP accomplished in 1998. In
the 2008 budget announced on 29 November 2007, the forecast budget deficit was
around 11 per cent of expected GDP of Z$16 quadrillion.. What's more, also
Zimbabwe's Reserve Bank is state possessed and the Governor had been ordered by
Mugabe (on a continuous premise throughout the years since 2000) to print
amounts of currency that grow the money supply at a rate well over Zimbabwes
inflation rate.
 Government Measures

2nd Zimbabwean Dollar: Value 10 billion times the old Zimbabwean Dollar

Dollarization in 2009 : Allowed foreign currencies to be used in economy, exchange

rate in billions

8 currencies as legal tenders in economy (2014) :

US dollar, South African rand, Botswana pula, British pound sterling, Australian
dollar, Chinese yuan, Indian rupee and Japanese yen
Dollarization
Shifted to US dollars and allowed 8 other currencies as legal tenders

Extremely high interest rates as well as exchange rates

Reversed inflation, Banking Systems stabilized, economy resumed growth

Hyperinflation

Hyperinflation occurs when a country experiences very high and usually accelerating rates
of inflation, rapidly eroding the real value of the local currency, and causing the population to
minimize their holdings of local money. The population normally switches to holding relatively
stable foreign currencies. Under such conditions, the general price level within an economy
increases rapidly as the official currency quickly loses real value.
Although hyperinflation is considered a rare event, it occurred as many as 55 times in the 20th
century in countries such as China, Germany, Russia, Hungary and Argentina.
Hyperinflation has been traditionally defines as referring to situation in which inflation rises
above 50% per month.