On Monday, Zimbabwe will start retiring its national currency: It will be exchanged at a rate of 35 trillion Zimbawean dollars per $1 U.S. Hyperinflation is probably the first word to come to mind, yet Zimbabwe is actually in deflation, and it's not clear what new experiment it will be subjected to after the wildest monetary ride of any country this century.
Accounts of Zimbabwe's experience with money in 2007 and 2008 now read like fairy tales. The monthly inflation rate passed 50 percent in March 2007. In March 2008, it was 3.5 million percent, and an egg cost 50 billion Zimbabwean dollars. A loaf of bread cost as much 12 new cars would have sold for 10 years before. It was no fun for Zimbabweans, who lugged plastic bags full of cash to market, but, remarkably, there was no rebellion against the men who had wreaked the havoc: President Robert Mugabe and Reserve Bank of Zimbabwe Governor Gideon Gono, a rich businessman with a Ph.D. from a Nigerian diploma mill and a direct line to Mugabe.
Gono's decision to turn on the printing presses was an act of desperation: Zimbabwe was under economic sanctions for chasing white farmers off their land, droughts were killing what agriculture was left, and Mugabe didn't know how to stop spending. Gono printed billion-dollar bills and exhorted merchants not to raise prices. It was even made illegal at one point.
It was also Gono, the central bank governor through 2013, who oversaw Zimbabwe's transition to the current multi-currency regime. It took a weakening of Mugabe's power and the formation of a coalition government for the plan to proceed, though Gono later said he'd planned it all. In 2009, the U.K. pound sterling, the U.S. dollar, the euro, the South African rand and the Botswana pula all became legal tender in Zimbabwe.
Gono had stumbled upon a variation on Friedrich Hayek's idea of denationalizing money, allowing currencies to compete, though the Austrian economist envisioned private issuers, not foreign governments.
Initially, it worked. Average annual inflation between 2009 and 2013 was 3.3 percent. The economy took off, achieving more than 8 percent average annual growth. Admittedly, the baseline was almost zero: In 2008, Zimbabwe's GDP per capita, based on purchasing power parity, dropped lower than it had been in 1954, when the country was still a British colony. Still, things were going better than when the printing presses were busy.
For people on the street, however, the multi-currency regime has been another stress test. Every merchant had to deal in multiple currencies (in practice, mainly rands, U.S. dollars and pulas), and all of them were scarce, because Zimbabwe had neglected to make arrangements with the central banks that issued the currencies. The cash could only infiltrate Zimbabwe through trade or transfers from migrants (10 percent of Zimbabwe's workforce is employed in South Africa). Gono's successor, John Mangudya, tried to make things easier last year by adding the Chinese yuan, the Australian dollar, the Japanese yen and the Indian rupee to the list of accepted currencies. But they are all pretty rare in Zimbabwe, and their introduction only helped companies from the four issuing countries that were doing business in the African nation, providing a hedge against currency fluctuations.
The scarcity of money boosts counterfeiting -- a big problem in Zimbabwe -- and depresses demand. Inflation has been negative since 2013. In an interview a year ago, Gono waxed eloquent about how badly the country was doing without him:
So, since 2009, Gono never printed a single penny. Gono never undertook any quasi-fiscal operation. Gono’s powers were clipped. For the last six months, from January to June 2014, Gono is nowhere to be seen. But what is the situation People are worse off than when Gono was there. The capacity utilisation of factories has gone so low (30%) that you can’t believe it; it is the lowest since records began. Poverty levels are far, far higher than they were in 2008. The banks can’t get any money. Civil servants, soldiers, police, pensioners, war veterans, and the rest of them are not getting their pay and pensions on time. But Gono is not there. Gono is gone!
Economists have been suggesting various solutions: reintroducing the Zimbabwean dollar (not a popular option); sticking to the U.S. dollar; moving to the rand, as two-thirds of Zimbabwe's exports go to South Africa. In any case, it will be another new situation for Zimbabweans to get used to, with new quirks arising along the way.
Through all this, Mugabe, now 91, continues to preside over the devastation. In 2013, he got rid of his coalition partners, winning the presidential election by a landslide -- or stealing it, if his opponents are to be believed.
More than a financial story, this is a tale of a people's endless patience. Mugabe took power with credentials earned as the liberator from colonization and was able to build a strong enough system of propaganda and repression. He subjected his country to idiocy and torture, but many will still believe external foes are to blame. "You've sanctions and we've sanctions too," Mugabe reportedly told Russian President Vladimir Putin during a meeting last month in Moscow. "That's why we should remain united."
Perhaps Putin and other authoritarian rulers don't see him this way, but Mugabe has set a powerful example for them. Unwittingly, he has also created a cautionary tale for any dictator's subjects.
Leonid Bershidsky
Mon Jun 15 2015
Zimbabwe will start retiring its national currency: It will be exchanged at a rate of 35 trillion Zimbawean dollars per $1 U.S. - AFP pic
Inisiatif IHH Healthcare lancar pemasangan panel solar wajar jadi contoh - Fadillah Yusof
IHH Healthcare Malaysia mencatatkan pencapaian baharu dengan melancarkan inisiatif pemasangan panel solar di seluruh rangkaian hospitalnya sekali gus menjadikannya pelopor.
Ahmad Zahid ucap tahniah kepada Farah Ain
Ahmad Zahid mengucapkan tahniah kepada atlet boling padang Nor Farah Ain Abdullah yang muncul juara pada Kejohanan Boling Padang Dalam Dewan Dunia 2024.
Raih RM31 juta sejak ditayangkan! Sheriff kini filem no. 1 di Malaysia
Berita gembira ini turut disokong oleh abang Syafiq, Syamsul Yusof yang turut bangga dengan kejayaan naskhah yang dihasilkan adiknya.
Letupan bom Sungai Golok: PDRM tingkat kawalan keselamatan sempadan Malaysia-Thailand
PDRM mempertingkatkan kawalan keselamatan di sempadan Malaysia-Thailand susulan insiden letupan bom dan bunyi tembakan di Sungai Golok.
Pemain ragbi meninggal dunia selepas perlawanan pasukan pilihan MB Kedah
Seorang bekas pemain Sukma Kedah meninggal dunia selepas menyertai perlawanan pertunjukan pasukan pilihan Menteri Besar Kedah pada Ahad.
OCC: Masih banyak usaha perlu dibuat dalam isu hak kanak-kanak
Masih banyak yang perlu dilakukan kerana Malaysia masih ketinggalan berbanding negara lain dalam menangani isu penderaan dan masalah sosial melibatkan kanak-kanak.
iPad Pro mungkin dijana dengan cip Apple M4 terbaharu, fokus ciri AI
Cip Apple M4 dijangka memfokuskan kepada keupayaan enjin neural yang disertakan bersama dengannya membolehkan ia menawarkan ciri AI yang lebih baik.
Lebih 840,000 permohonan untuk London Marathon 2025 pecah rekod dunia
Jumlah permohonan untuk menyertai larian TCS London Marathon tahun depan telah memecahkan rekod dunia.
WEF: Anwar jumpa 50 pemimpin industri & perniagaan, yakin pelabur bernilai tinggi pilih Malaysia
Datuk Seri Anwar Ibrahim menzahirkan keyakinan lebih banyak pelabur bernilai tinggi akan memilih Malaysia sebagai destinasi pelaburan mengikut jejak langkah syarikat-syarikat gergasi seperti Tesla, AWS, Infineon dan Nvidia.
AWANI Ringkas: Ikut jejak syarikat gergasi lain
Ikuti rangkuman berita utama yang menjadi tumpuan sepanjang hari di Astro AWANI menerusi AWANI Ringkas.