Zimbabwe’s government has officially pulled the plug on the inflation riddled currency on Friday, arranging for an exchange rate for the old multi-zeroed Zimbabwean Dollar of 35 quadrilion for $1 in U.S. currency. However, this rate is available only for those who have upwards of 175 quadrillion dollars in their bank accounts; those who possess less will be given $5 regardless of the sum they have in older currency.
Zimbabwe’s hyperinflation ends five years after the country first renounced the currency in a favor of a hybrid system in which transactions are mainly done in US dollars and South African rands, with some other currencies also playing smaller roles. At the time, the inflation rate was a staggering 230 million percent, still way shy of its 2008 record of 500 billion percent immediately after the start of the global financial crisis.
The ridiculous amount of inflation has made the currency next to unusable – huge plastic containers full of bills were needed for the most menial of purchases, and bills amounting to 100 trillion Zimbabwean dollars could not even help pay public transport fees for a week. Prices were changing daily or even during the same day as most people were uncertain of their financial prospects and chose to deal in more stable currencies. At the moment the currency was interrupted, its inflation was rising at a rate of 2,2 million percent per year, a quarter of the 8,8 million record posted in 2008.
Several factors worked towards the spectacular decline of the Zimbabwean dollar, which had been inaugurated in 1980 and used to be even more valuable than its US counterpart as exchange rates go. Most of them are related to poor economical managements by Zimbabwe’s governments during the past two decades, including financing its rather unneeded participation in the bloody Second Congo War and paying pensions for war veterans afterwards. Moreover, long bouts of drought have hit the agriculture – the sector from which Zimbabwe earns most of its GDP – and most of its terrain is now cultivated by subsistence farmers, severely squandering production.
However, the exchange campaign might live to be less enticing for Zimbabweans than its central bank hopes, as some of the overly inflated old currency fetches price hundreds of time better on the black market and for collector, with E-bay postings for 100 trillion Zimbabwean dollar bills reaching almost $160.
Image Source: CNBC
