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History

The Zimbabwean dollar’s predecessor, the Rhodesian dollar was essentially equal to half of a pound sterling when it was adopted during the decimalisation of 1970, the same practice which was used in other Commonwealth countries such as South Africa, Australia, and New Zealand. The selection of the name was motivated by the fact that the reduced value of the new unit correlated more closely to the value of the US dollar than it did to the pound sterling.

Introduction of the first dollar

The first Zimbabwean dollar was introduced in 1980 and replaced the Rhodesian dollar at par. The initial ISO 4217 code was ZWD. At the time of its introduction, the Zimbabwean dollar was worth more than the U.S. dollar, with ZWD 1 = USD 1.47 However, the currency’s value eroded rapidly over the years. On 26 July 2006, the parallel market value of the Zimbabwean dollar fell to one hundred to the British pound.

Inflation

Rampant inflation and the collapse of the economy severely devalued the currency, with many organisations using the United States dollar, the euro, the pound sterling, the South African rand, or the Botswana pula instead. Early in the 21st century, Zimbabwe started to experience hyperinflation. Inflation reached 623% in January 2004, then fell back to low triple digits in 2004 before surging to 1,281.1% in 2006

Inflation reached another record high of 3714% (year-on-year) in April 2007.[34] The monthly rate for April 2007 exceeded 100%, implying that inflation may soon exceed all forecasts, as 100% monthly inflation over sustained 12 months would produce annual inflation of over 400,000%. Mid-year inflation for 2007 has been breaching records as inflation for May 2007 was estimated at 4,530% (year-on-year).

• On 21 June 2007, the United States ambassador to Zimbabwe, Christopher Dell, told The Guardian newspaper that inflation could reach 1.5 million percent by the end of the year. The unofficial inflation rate at that time was above 11,000%, and the black-market exchange rate was Z$400,000 to the pound.
• On 13 July 2007, the Zimbabwean government said it had temporarily stopped publishing (official) inflation figures, a move that observers said was meant to draw attention away from “runaway inflation which has come to symbolise the country’s unprecedented economic meltdown.”
• On 27 July 2007, the Consumer Council of Zimbabwe (CCZ) said its recent calculations for the monthly expenditure for an urban family of six showed that inflation for the month of June was more than 13,000%. The Central Statistical Office (CSO), the official source of Consumer Price Index numbers, had not released its figures since February (2007) when it reported annual inflation at 1,729%.
• In September 2007, the Central Statistical Office announced an official inflation rate of 6,592.8% for August 2007. Private estimates were as high as 20,000%.
• In October 2007, they announced an official inflation rate of 7,892.1% for September 2007.
• In November 2007, they announced an official inflation rate of 14,840.5% for October 2007.

Hyperinflation

Official, black market, and OMIR exchange rates 1 Jan 2001 to 2 Feb 2009. Note the logarithmic scale.
Main article: Hyperinflation in Zimbabwe

• On 27 November 2007, the chief statistician of the Central Statistical Office, Moffat Nyoni, announced that it would be impossible to calculate the inflation rate of the dollar any further. This was due to the lack of availability of basic goods, and subsequent lack of information from which to calculate the inflation rate. The International Monetary Fund stated that inflation was predicted to rise to 100,000% per annum.
• On 14 February 2008, the Central Statistical Office announced that the inflation rate for December 2007 was 66,212.3%, and the unofficial exchange rate was Z$7.1 million to the US$1.
• On 20 February 2008, the Central Statistical Office said that officially, inflation has in January 2008 gone past the 100,000% mark to 100,580.2%.
• On 4 April 2008, the Financial Gazette (FinGaz) reported that officially, inflation in February 2008 jumped to 164,900.3%.
• On 15 May 2008, the Zimbabwe Independent reported that officially, inflation in March 2008 jumped to 355,000%.
• On 21 May 2008, SW Radio Africa reported that, according to an independent financial assessment, inflation in May 2008 jumped to 1,063,572.6%. The state statistical service has said there are not enough goods in the shortage-stricken shops to calculate any new (official) figures.
• On 26 June 2008, the Zimbabwe Independent reported that, latest figures from the Central Statistical Offices (CSO) showed that annual inflation rose by 7,336,000 percentage points to 9,030,000% by 20 June and was set to end the month at well above 10,500,000%.

The Sydney Morning Herald reported that inflation was likely to be 2 million percent in May 2008 and 10–15 million percent in June 2008, according to John Robertson, a respected Zimbabwean economist. Robertson estimated inflation in July 2008 to be 40–50 million percent. Inflation can only be estimated because of the impossibility of following the cost of individual goods.

According to Central Statistical Office statistics, annual inflation rate rose to 231 million percent in July 2008. The month-on-month rate rose to 2,600.2%.

By December 2008, annual inflation was estimated at 650 million googol percent (6.5 × 10108  percent), equivalent to a daily inflation rate of 96%.

As predicted by the quantity theory of money, this hyperinflation has been caused primarily by the Reserve Bank of Zimbabwe’s choice to mushroom the money supply.

Since February 2009, following a period of hyperinflation and widespread rejection of the devalued currency, companies and individuals are permitted to transact domestic business in other currencies, such as the US$ or the South African rand. In consequence, the Zimbabwean economy has undergone dollarisation and the Zimbabwean dollar has fallen out of everyday use.

Abandonment

The use of foreign currencies were legalised in January 2009, causing general consumer prices to stabilise again after years of hyperinflation and price speculation. The move led to a sharp drop in the usage of the Zimbabwean dollar, as hyperinflation rendered even the highest denominations worthless.

On 2 February 2009 the Zimbabwean dollar was redenominated once more, at the ratio of 1 000 000 000 000 (1012) ZWR to 1 ZWL. The third dollar was expected to be demonetised on 1 July 2009, but the complete abandonment of local currency was hastened by the decline in overall consumer usage of local currency in favour of other currencies, helped by the legalisation of the use of hard currencies in January 2009.

The dollar was effectively abandoned as an official currency on 12 April 2009 when the Economic Planning Minister Elton Mangoma confirmed the suspension of the national currency for at least a year, but exchange rates with the Zimbabwean dollar were maintained for up to a year afterwards. The current government of Zimbabwe said that the Zimbabwean currency should only be reintroduced if the industrial output was 60% or more of its capacity, compared to the April 2009 average of 20%.

SOURCE: Wikipedia

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