Imagine waking up to having a trillion-dollar bill in your pocket. One must be shocked; ecstatic at the thought of it- a dream come true. Only to find out that a loaf of bread is now priced at a whopping 30 billion dollars. While it sounds unproportionately bizarre, a hyper-inflated economy was dealing with just that.
Zimbabwe had been a country with an abundance of precious stones, energy, beautiful landscapes, and monument ruins that would captivate anyone by sight. However, the people of Zimbabwe themselves lost access to everything they were proud of when an economic fiasco hit the country which led to the second-highest inflation crisis to ever occur; the first being post-world war Hungary. So what led the country to this situation? Let us start by understanding what inflation is.
To simplify, let us compare the price of anything around us. Be it a bar of chocolate, a packet of milk, rice, clothes, or any such commodity that is priced and can be bought with a currency. You would have noticed that the price of any of these is comparatively higher than what it was a couple of months, or years ago. This means, as general prices rise, the purchasing power of consumers decreases. A level of inflation is mostly inevitable, but the point where it gets to dangerous levels that pose a threat to the economy of the whole country is termed Hyperinflation.
Why It happened?
Zimbabwe was a British colony and was exploited for its rich and diverse resources. As soon as they attained independence, the elected president Robert Mugabe managed to successfully consolidate all the power for himself. This regime continued for several years. Negligence of economic crisis by the people at high posts including the dictator himself led Zimbabwe into a paramount debt. Corruption further paved its way as a cause of the travesty that befell Zimbabwe.
Robert Mugabe knew that as a dictator, he had to be on his toes. Rival party leaders, coworkers, and even his general had to be kept happy and rich for him to be able to cling on to power peacefully. However, the demand for these bribes never went down and Mugabe had already taxed everything he possibly could. His foreign policies, as a vigilant, power-hungry dictator kept the foreign investors at bay. What he did have access to, were the national banknote printers. So around 2001, he did just that- print money, more, every day whenever there was a shortage of it. This, in turn, reduced the purchasing power of the Zimbabwean dollar as there was a surplus of currency then there were goods to be oﬀered. People were losing their faith in the government which in turn lead to a fickle sense of trust for the currency; and rightly so, because money was losing its value daily. However, the government continued its reckless printing of currency, in higher denominations (In 2008, Inflation was at an astronomical level, which lead to the government printing single 100 Trillion Dollar notes!).
*The rise in prices grew to such an extent where the government was forced to stop recording the rate of change.
How did they try to tackle it?
By the end of 2008, the Zimbabwean dollar was termed “valueless” and the president was forced to allow the legalization of transactions in foreign currencies as an alternative to their native currencies as ‘bond notes’. These were essentially government-issued bonds in physical form that assured the value of the foreign currencies that were now legalized. For eg. The US dollar, British Pound, the Chinese Yuan, and some more. This gave some relief to the horrific conditions of the economy. The monopoly In the telecom sector actually paved way for solutions too as mass adoption for digital money of a huge mobile phone using country was an easier task. Companies like Safaricom launched Mobile payment methods like the M-Pesa which helped in security and storage issues of the heaps of currency that only provided little value.
Know thy worth:- When inflation was at its highest in Zimbabwe, 1 US dollar could get you……… 2,621,984,228,675,650,147,435,579,309,984,228 Zimbabwean Dollars! Phew, big numbers.
Many other countries have been subject to Hyperinflation over the years. But, a political reason leading to such a massive failure in the economy was a first. Today, the ruling power has changed, the country claims to have been bettering its financial mistakes and taking measures to prevent such a setback from ever happening again. Will they succeed? Only time shall tell.