Zimbabwe could be retracing road to hyperinflation

zimbabwe-bond-notes

Zimbabwe introduced a new currency Monday, but citizens of the foundering African nation aren’t exactly embracing the so-called “bond note” money.

Zimbabwe has been operating to a large degree on US dollars since 2009, after the Zimbabwe dollar was abandoned following some of the worst inflation in world history – peaking at something akin to 500 billion percent – that left residents barely able to buy such items as a single egg with a 1 billion dollar banknote.

The government introduced the new currency in the form of 1 dollar bond coins and 2 dollar bond notes to address the shortage of US dollars and to boost exports. But many say they aren’t buying into the government’s plan.

“They are only giving us bond notes because they don’t have real dollars,” Lovemore Chitongo, 40, a shoe salesman in Harare, told Agence France-Presse. “There is no way the bond note will be equal to the US dollar. The market will determine the exchange rate.”

Proof that government dictates and reality often don’t match up could be seen in the fact that Chitongo was charging $20 in US dollars per pair of shoes but 25 dollars in bond notes.

He would use the difference to buy US dollars on the black market, he told AFP.

What will shortly begin happening in Zimbabwe if citizens lose confidence in the new currency is that bond notes will be refused, or, if citizens are legally required to accept them, they will keep the US dollars and pass the bond notes on to someone else as quickly as possible.

Following the collapse of the Zimbabwean dollar in 2009 the country switched to a multi-currency system, according to Newsweek. At least nine currencies are now legal tender in Zimbabwe: the US dollar, the South African rand, the euro, the British pound, the Australian dollar, the Botswana pula, the Japanese yen, the Indian rupee and the Chinese yuan.

Not all are accepted by Zimbabwean traders, however. The US dollar is the most widely-used currency.

Zimbabwe’s economy collapsed under President Robert Mugabe’s chronic mismanagement. The nation’s leader since 1980, Mugabe sped redistribution of Zimbabwe’s farms from white landowners to blacks through forced confiscation beginning early last decade. Coupled with corruption and misconduct, droughts and an AIDS crisis, the nation of 13 million collapsed economically in 2009.

In fact, inflation was so bad it’s not certain whether anyone knows the exact rate at its peak.

While Zimbabwe officials cited an official inflation rate of 11.2 million percent in August 2008, the International Monetary Fund stated the country was suffering from 500 billion annual inflation rate and Newsweek asserted that Zimbabwe’s inflation rate reportedly peaked at “around 90 sextillion percent – or nine followed by 22 zeros.”

In an effort to win citizens to the new currency, the central bank recently launched an advertising campaign trying to allay people’s fears, saying retailers and businesses had agreed to accept the new currency.

However, opposition to bond notes has sparked fierce anti-government protests which have resulted in brutal police crackdowns.

Police on Monday broke up a protest planned by the pressure group Tajamuka in Harare and arrested the group’s spokesman, according to Agence France-Presse.

“The government is only treating the symptoms without attending to the problems,” Antony Hawkins, an economist at the University of Zimbabwe’s Business School, told the wire service. “We are not earning enough foreign currency and bond notes are not going to solve that. It will make the situation worse.”

In past few weeks, many Zimbabweans slept in lines outside banks so that they would have a better chance to withdraw US dollars from their accounts. Many are concerned that their US dollars were going to be converted into bond notes.

Banks, however, put severe limits on daily withdrawals, just $50 a day, up to $150 a week.

“I will take payments in bond notes but the big question is what do I do with them since some shops are refusing to accept them?” Lewis Mapira, a taxi driver in Harare, told AFP.

(Top: A Zimbabwean holds up 2 dollar bond notes, which began circulating Monday.)

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3 thoughts on “Zimbabwe could be retracing road to hyperinflation

  1. And no good hoping that China will bail them out again…the Chinese had their fingers burned by Mugabe before.
    The country – so rich in resources – has been ruined by greed and corruption: a government previously supported through thick and thin by South Africa’s ANC has managed to oppress the very people it was supposed to liberate.
    And should Mugabe’s current wife succeed him then matters will be even worse.
    May God help the people of Zimbabawe, because the West cares more about mouthing liberal pronouncements about anti colonialism than actually doing anything to help the people Britain effectively abandoned to their fate.

    • It’s unfortunate that individuals such as Mugabe and Castro and others such as Obiang in Equatorial Guinea seem to live forever, ensuring that their corruption and mismanagement have decades to fully ruin the countries they were supposed to be shepherding. These sort never seem to shuffle off this mortal coil in any hurry, do they?

      • Despite all, I can’t put Castro alongside this pair as I don’t feel he started out as a dictator, but, yes, they live long and well at the expense of their people – with the connivance of the West.

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