The term hyperinflation is almost an understatement when it comes to describing the level of inflation in Zimbabwe. In July 2008, inflation was estimated to be 231 million per cent. In January 2009, two estimates were made: one of 5 sextillion per cent (5 and 21 zeros); the other of 6.5 quindecillion novemdecillion per cent (65 and 107 zeros). These figures are simply mind-boggling for most people living in low-inflation economies.
Commentators say that prices can double in a single day and this can render banknotes useless very quickly. In fact, local banknotes are scarcely used as people turn to overseas currencies that offer more stability. Recognising this, in late January 2009 the government officially allowed foreign currencies to be used in Zimbabwe as well as the Zimbabwe dollar.
In an attempt to stabilise the currency the Zimbabwean central bank on more than one occasion has tried dropping several zeros from the currency. But this has had little effect and in January 2009 a new series of banknotes was issued, including a Z$100 trillion note. This is unlikely to be the last issue though, but what comes after a trillion?
Zimbabwe rolls out Z$100tr note BBC News Online (16/1/09)
ZIMBABWE: Inflation at 6.5 quindecillion novemdecillion percent IRIN News (United Nations) (21/1/09)
- Define the term hyperinflation.
- Analyse the main causes of hyperinflation.
- Discuss policies that the Zimbabwean government could adopt to try to reduce the level of inflation in the economy.
- Assess the impact of hyperinflation on the other major macro-economic targets.
- Research another instance of hyperinflation and write a brief summary of the cause(s) and the solution(s). You may find the Wikipedia entry on hyperinflation a good starting point.