How Zimbabwe paid the price for hyperinflation, offering a grim lesson for Venezuela
After inflation hit 500 billion per cent in Zimbabwe a decade ago, savings, investments and pensions were all wiped out, millions of people moved abroad and foreign investment evaporated
Ten years after hyperinflation peaked in Zimbabwe at an estimated 500 billion per cent annually, the country’s economy still lies in ruins, unable to fund basic public services and plagued by mass unemployment and emigration.
Zimbabwe’s long and painful suffering is an ominous lesson for Venezuelans facing currency devaluations in a desperate bid by their government to tackle hyperinflation.
International Monetary Fund economists warn that Venezuela’s inflation rate could exceed 1 million per cent this year.
On Friday – ahead of the Monday’s monetary overhaul that introduced a new currency and, in effect, knocked five zeroes from prices – Venezuelans rushed to shops to spend their old Bolivars. A kilogram of tomatoes cost about 5 million bolivars, and a chicken 14.6 million Bolivars.
But the experience of Zimbabwe puts that in the shade.
Prices there spiralled even further out of control between 2008 and 2009 as the Zimbabwe dollar plunged in value, triggered in part by the seizure of white-owned farms.
As agricultural output plummeted, Robert Mugabe’s government printed vast amounts of Zimbabwe dollars in a doomed attempt to ride out the crisis.
Shops raised prices several times a day and, in 2008, a 100-trillion-dollar note was introduced – though it could barely buy a loaf of bread as supplies ran out and the economy imploded.
After several drastic devaluations, Zimbabwe abandoned its currency in 2009 in favour of the US dollar.
Locals’ savings, investments and pensions were all wiped out, millions of people moved abroad and foreign investment evaporated.
Zimbabweans struggled on, using scarce US dollar bills, though the little remaining economic activity was often conducted through bartering and informal trade.
In 2016, the government tried to tackle the chronic shortage of US banknotes by introducing a parallel currency called “bond notes”, theoretically worth the same as a US dollar.
Bond notes are in reality worth far less than the US dollar, and many Zimbabweans fear that the currency could be rendered worthless by another hyperinflation storm.
Backed by the military and his patronage network, Mugabe survived the country’s economic collapse.
He was finally ousted last year at the age of 93 when the generals turned against him after 37 years in power.
His successor, President Emmerson Mnangagwa, from the same ruling ZANU-PF party elite, has vowed to revive the economy but the legacy of hyperinflation appears to thwart any hopes of rapid recovery.
High-denomination notes from the hyperinflation era are now sold by street hawkers as souvenirs.