Hyperinflation in Zimbabwe

1. Presented by HasanAli

2.  What is Hyperinflation ?
 What exactly happened in Zimbabwe
 What's the way out

3.  In economics, hyperinflation occurs when a country
experiences very high and usually accelerating rates
of inflation, causing the population to minimize
their holdings of money.
 Meanwhile, the real value of economic items
generally stay the same with respect to one
another, and remain relatively stable in terms of
foreign currencies.

4.  Unlike regular inflation, where the process of rising
prices is protracted and not generally noticeable except
by studying past market prices, hyperinflation sees a
rapid and continuing increase prices and in the supply of
money,and the cost of goods.
 Hyperinflation is often associated with wars, their
aftermath, sociopolitical upheavals, or other crises that
make it difficult for the government to tax the
population, as a sudden and sharp decrease in tax
revenue coupled with a strong effort to maintain the
status quo can be a direct trigger of hyperinflation.

5.  Confidence Model - In this model, some event, or series
of events, such as defeats in battle removes the belief
that the authority (a bank or a government) issuing the
money will remain solvent. Because people do not want
to hold notes which may become valueless, they want
to spend them.
 Monetary Model - In this model, hyperinflation is
a positive feedback cycle of rapid monetary expansion.
When businesspeople perceive that the issuer is
committed to a policy of rapid currency expansion, they
mark up prices to cover the expected decay in the
currency's value.

7.  Highest inflation rate – November 2008 - 7.96
× 1010 %
 Equivalent daily inflation rate - 98.01%
 Time required for prices to double - 24.7
hours

8.  30 years ago – ZWD = 1.25 USD
 Gradually, rampant inflation and collapse of the economy devalued
the currency.
 Hyperinflation took shape in early 21st century
 2004 - 624%
 2006 - 1,730%
 June 2007- 11,000%
 July 2008 – 2,200,000%
 The First Zimbabwe Dollar (ZWD) is obsolete. In June 2006, it was
replaced by the Second Zimbabwe Dollar (ZWN) at a rate of 1000 to 1. A
third and fourth dollar were later introduced and then the currency was
abandoned.
 Zimbabwe no longer has its own currency and Zimbabwe dollars of all
types are worthless.
 1 ZWD = 0.00276 USD (today !)

9.  Land reform program – focused on taking
land from white farmers and redistributing
those properties and assets to black farmers.
 Food production and revenues from export of
food plummeted
 Monetary phenomena (the result of
Mugabe's government printing money)

10.  No functioning Central Bank and no local
currency
 Stores don’t have food on shelves
 People are hungry
 No water, no electricity
 Prices rise daily
“Imagine, you cannot even carry the exact bus fare on
your way to work because the chances are high that
you will be told fares have gone up; you can't even
make budgets for household commodities, as used to
be the case seven or so years ago."

11.  Use of foreign currencies
 The black market
 Redenomination

12.  The most direct solution is a credible promise
to stop printing unlimited amounts of money.
 The government could declare some foreign
currency to be the nation's official currency.
 Formation of the inclusive Government and
the liberalization of the economy.