Hyperinflation in Zimbabwe is a period of currency instability beginning in the late 1990s shortly after the confiscation of private farming from landowners, near the end of Zimbabwe's involvement in the Second Congo War. During the peak of inflation from 2008 to 2009, it is difficult to measure Zimbabwe's hyperinflation as the Zimbabwean government stopped applying official inflation statistics. However, the peak month of Zimbabwean inflation is expected to reach 79.6 billion percent by mid-November 2008.
In 2009, Zimbabwe stopped printing its currency, with currencies from other countries used. By mid 2015, Zimbabwe announced plans to fully switch to the US dollar by the end of 2015.
Video Hyperinflation in Zimbabwe
Konteks historis
On April 18, 1980, the Republic of Zimbabwe was born from the former British Southern Rhodesia colony. The Rhodesian dollar is replaced by Zimbabwean dollars at face value. When Zimbabwe gained its independence, the newly introduced Zimbabwean dollar was initially more valuable than the official United States dollar exchange rate, this does not reflect reality as in the case of poor and open market purchasing power is less valuable, due mainly to higher inflation in Zimbabwe. In the early years, Zimbabwe experienced strong growth and development. Wheat production for non-dry years is proportionately higher than in the past. The tobacco industry is also growing rapidly. Economic indicators for the country are strong.
From 1991 to 1996, Zimbabwe President Zimbabwe President Robert Mugabe started the Economic Structural Adjustment Program (ESAP) which has serious negative effects on Zimbabwe's economy. In the late 1990s, the government instituted land reforms aimed at expelling white landowners and placing their holdings in the hands of black farmers. However, many of these "peasants" have no experience or training in farming. From 1999 to 2009, the country experienced a sharp decline in food production and in all other sectors. The banking sector also collapsed, with farmers unable to obtain loans for capital development. Food output capacity fell 45%, manufacturing output 29% in 2005, 26% in 2006 and 28% in 2007, and unemployment rose to 80%. Life expectancy is declining.
The Reserve Bank of Zimbabwe blames hyperinflation on economic sanctions imposed by the United States, the IMF and the European Union. These sanctions affect the Zimbabwean government, asset freezes and visa refusals targeted at 200 specific Zimbabwean citizens who are closely tied to the Mugabe regime. There are also restrictions placed on trading with Zimbabwe, both by individual businesses and the Office of Foreign Assets Supervision of the US Treasury.
Maps Hyperinflation in Zimbabwe
Cause
The monetarist view is that the general increase in the price of the goods is less a comment on the value of the goods than the value of money. It has objective and subjective components:
- Objectively, that money has no solid basis for giving it value.
- It is subjective, that the person holding the money is less confident in its ability to retain its value.
Important for both components is the discipline of creating extra money. However, Mugabe's government made money to finance engagement in the Democratic Republic of Congo and, in 2000, in the Second Congo War, including higher salaries for soldiers and government officials. Zimbabwe is less reporting its war spending to the International Monetary Fund by perhaps $ 23 million per month.
Another motive for excessive money creation is dealing with oneself. Transparency International placed the Zimbabwean government on the order of 157 in terms of institutionalized corruption. The lack of confidence in the government undermines confidence in the future and confidence in the currency.
Economic misconceptions by governments can create shortcomings and occupy people with workarounds rather than productivity. Although this is detrimental to the economy, it does not necessarily undermine the value of the currency, but it can jeopardize future confidence. Widespread poverty and violence, including government violence to paralyze political opposition, also undermines confidence in the future. Land reforms degrade agricultural output, especially in tobacco, which accounts for one-third of Zimbabwe's foreign exchange earnings. Manufacturing and mining also declined. The objective reason is, once again, that the farm is put in the hands of inexperienced people; and subjectively, that the act undermines the security of the property.
Government instability and unrest are seen in other areas. Zimbabwean troops, trained by North Korean soldiers, carried out massacres in the 1980s in the southern provinces of Matabeleland and the Midlands, although Mugabe's government called guerrilla attacks on civilian and state targets. The conflict between the ethnic minorities of Ndebele and the majority of Shona Mugabe people has caused many clashes, and there is also riot between blacks and whites, where land reform is a factor. This aspect of reform that seeks to ban white people from business ownership leads many to leave the country.
Self-perpetuation
Lack of confidence in the government to apply fiscal control on itself. In Zimbabwe, both the issue of higher denominations of paper money and the proclamation of the new currency regime caused the currency holder to expect that the new money would be more stable than the old one. Remedies announced by the government have never included a reliable basis for monetary stability. Thus, one reason the currency continues to lose its value, causing hyperinflation, is that so many people expect it.
Inflation rate
During the five-year hyperinflation range, the rate of inflation is highly fluctuating. At one point, the US Ambassador to Zimbabwe estimated that it would reach 1.5 million percent. In June 2008, the annual price growth rate was 11.2 million percent. The worst inflation occurred in 2008, leading to the abandonment of the currency. The peak of hyperinflation occurred in mid-November 2008 with an estimated rate of 79.6 billion per month. This earned US $ 1 to be equivalent to a staggering amount of Z $ 2,621,984,228.
Older Threaded Level
When hyperinflation accelerates, the Zimbabwe dollar rate declines rapidly against other currencies, but the official exchange rate published by the Reserve Bank of Zimbabwe is rarely updated; This makes it impossible to say from an official source how many Zimbabwean dollars are really valuable against other currencies on a given day, which in turn disrupts international business transactions involving the Zimbabwean dollar. Staff from WM/Reuters devised an indirect measurement tool called the Old Mutual Asset (OMIR). It takes the daily price of shares in Old Mutual insurance firms traded on London and Harare stock markets and derives from the notional daily exchange rate between the Zimbabwean dollar and the pound. Stocks have much less capital control than through the Zimbabwean banking system, so stocks are used as vehicles to move capital between currencies by buying shares in London or Harare and then selling them at other locations.
The Old Mutual Implied rate was widely adopted by the benchmark rate for unofficial currency exchange until intervention by the Reserve Bank of Zimbabwe in May 2008 to prohibit the transfer of shares in Old Mutual, ABC and the African Meikles Kingdom abroad, thereby halting their fungibility.
Adaptations
Use of foreign currency
In 2007, the government declared inflation illegal. Anyone who raises the price of goods and services is subject to arrest. This is a price freeze, which is usually not effective in stopping inflation. Officials arrested many company executives to change their prices.
In December 2008, the Reserve Bank of Zimbabwe licensed about 1,000 stores to handle foreign currencies. Citizens are increasingly using foreign currency in daily exchanges, as local shops say prices are lower in Zimbabwe dollars because they require foreign currency to import foreign goods. Many businesses and street vendors continue to do so without getting a license.
In January 2009, acting Finance Minister Patrick Chinamasa lifted restrictions to only use Zimbabwean dollars. It also recognizes what has been done by many people. Residents are allowed to use US dollars, euros, and South African rand. However, teachers and civil servants are still paid in Zimbabwean dollars. Although their salaries are in trillions per month, this amounts to about US $ 1, or half of the daily bus fare. The government also uses restrictions on bank withdrawals to try to limit the amount of money in circulation. This limits the withdrawal of cash up to $ Z500,000 which is about US $ 0.25.
Dark market
Prices in stores and restaurants are still quoted in Zimbabwean dollars, but adjusted several times a day. Every Zimbabwean dollar earned needs to be exchanged for foreign currency in the parallel market immediately, or the holders will experience significant value losses. For example, a mini bus driver arrears the rider in Zimbabwean dollars, but the rates are different throughout the day: Afternoon travel at the highest price. He sometimes exchanged money three times a day, not in the bank but in the back room of the office and the parking lot.
Such business places are a black market, an arena that is explicitly outside the law. Transactors can avoid a price freeze and mandate to use Zimbabwean dollars.
The black market serves the demand for everyday items such as soap and bread, since grocery stores operating within the law no longer sell tightly controlled items, or bill more customers if they pay in Zimbabwean dollars. At one point, a loaf of bread was Z $ 550 million in the regular market, when bread was even available; In addition to travel to other countries, the black market is the only choice for almost any good, and bread may cost Z $ 10 billion.
Redenominasi
At independence in 1980, the Zimbabwean dollar became the common currency. Initially, paper records are in denominations of Z $ 2, 5, 10 and 20, and coins in denominations of 1, 5, 10, 20, 50 cents, and Z $ 1. Since larger bills are required to pay some money, the Reserve Bank of Zimbabwe plans to print and distribute denominations of up to Z $ 10, 20, 50, and 100 trillion. New denomination announcements are increasingly frequent; The Z $ 200 million bill was announced just days after the printing of $ 100,000,000.
The government is not trying to fight inflation with fiscal and monetary policy. In 2006, before hyperinflation peaked, the bank announced it would print bigger money to buy foreign currency. The Reserve Bank scored a $ 21 trillion bill to pay off debt to the International Monetary Fund.
On three occasions, the Reserve Bank of Zimbabwe redenomined its currency. First, in August 2006, the Reserve Bank remembers the record in exchange for the new record with three zeroes deducted from the currency. In July 2008, Reserve Bank of Zimbabwe governor Gideon Gono announced a new Zimbabwean dollar, this time with 10 zeros removed. Z $ 10 billion will be denominated to Z $ 1. This step not only slows down inflation but also makes calculations more manageable.
The third redenomination, resulting in "the fourth Zimbabwean dollar," occurred in February 2009, and dropped 12 zeros more than the currency. Thus it is worth 10 trillion trillion dollars in original, because the three redenominations together reduce the original dollar value by 10 3 ÃÆ'â € "10 10 ÃÆ'â €" 10 12 = 10 25 . The computer can not handle the amount of zero in such a way that other forms of money should be used to act as normal money (check the carrier). The bank must enter a lower amount on the deposit or withdrawal of the slip then will put up a closing statement, such as "multiply by 1 000,000 or add 10 zeros to your sum to get real value". The same is true for businesses as well and all traders.
Solution
A solution that is effectively adopted by Zimbabwe is to adopt some foreign currency as official. To facilitate trade, it is less important which currency to adopt than the government standard on a single currency. The US dollar, euro, and South African Rand are candidates; The US dollar has the highest and most widely traded credibility in Zimbabwe. Zimbabwe can join the nearby countries of Lesotho, Namibia, South Africa, and Swaziland, which is the General Monetary Region, or "Zone Rand" by formally deciding to use rand to promote trade and stability.
In 2009, the government ignored the printing of the Zimbabwean dollar. It implicitly solves the chronic problem of a lack of confidence in the Zimbabwean dollar, and forces people to use foreign currency of their choice. Since then Zimbabwe has used a combination of foreign currency, mostly US dollars.
In 2014, the Reserve Bank of Zimbabwe launched a "convertible" coins in denominations of US $ 0.01 to US $ 0.50. The bank said that 80% of Zimbabweans use the US dollar, and said the lack of local coins encourages retailers to round up prices to the next higher dollar. The coins extend the use of the dollar as de facto currency , and indeed the National Bank has repeatedly assured that it has no intention to return the national currency. As of May 2016, USD liquidity has declined rapidly and John Mangudya, governor of the Reserve Bank of Zimbabwe, said Zimbabwe will print new bonds that it says will be equivalent to the US dollar. This should be done in the next two months. Some residents have denied this, saying that the 2008 error is now back and they will not receive bonds.
Demonetization
In June 2015, the Reserve Bank of Zimbabwe said it would initiate a process for "demonetise" (ie, to officially rate zero fiat currency). The plan is to have completed the transition to the US dollar by the end of September 2015. In December 2015, Patrick Chinamasa Zimbabwe's Finance Minister said they would make the Chinese yuan their primary reserve currency and legal tender after China canceled $ 40 million in debt. However, this was rejected by the Reserve Bank of Zimbabwe in January 2016. As of June 2016, nine currencies are the legal means of payment in Zimbabwe but are estimated at 90% of transactions in US dollars and 5% in Rand.
References
Source of the article : Wikipedia
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