Hyperinflation in Zimbabwe Coming to an End

(Photo Credit:blog.iconflict.com)

For those who didn’t know, Zimbabwe has spent the past several years in hyperinflation with inflation at rates that are hard to comprehend. Here in Canada, our inflation rate hovers around 1-3%, but last July inflation was 231,000,000% in Zimbabwe. Pretty astonishing.

There is a good example to help understand how drastic inflation is in Zimbabwe, but first we must understand the exchange rate. In April 2008, a new 50,000,000 Zimbabwean Dollar note (and yes you are reading correctly 50 million) was issued so people could have enough cash to purchase goods whose prices became so highly inflated. This note was worth about 1.20 US dollars, which at the time was about $1.20 Canadian as well (the dollar was around par in April 2008).

Now for the example. By early July 2008, a bottle of beer cost $100 billion Zimbabwean dollars (can I borrow $100 billion for a beer Bob?), but an hour later, the price had gone up to $150 billion. That is a 50% increase in price. To put it in terms easier to understand that is the equivalent of going to a bar and paying $4 for a beer and then an hour later paying $6. You can see how this would erode a lot of your purchasing power. Such rapid inflation has further decreased the standard of living of the citizens of Zimbabwe and has caused Zimbabwe’s economic growth to fall off the map.

(Photo Credit: Discott) A selection of Zimbabwe Reserve Bank bearer cheques printed between July 2007 to July 2008 to illustrate the hyperinflation rate in Zimbabwe.

Recently, Zimbabwe adopted the U.S. dollar in an attempt to bring hyperinflation to an end. And so far it has been working. Recent figures were released from Zimbabwe’s Central Statistical Office showing that prices have begun to fall for the first time in years. The price of goods valued in U.S. dollars (Zimbabwe’s new official currency), fell by 3% in January and February. Although inflation is still very high in Zimbabwe, it is finally beginning to fall, which will allow Zimbabweans to regain purchasing power. Hopefully with a more stable currency, the people of Zimbabwe can have some increases in their standard of living.  But, more importantly the government of Zimbabwe needs to be cleaned of corruption.  That is another story.

If you are interested in becoming a billionaire you can purchase Zimbabweans notes on ebay.