This is now madness. I think we are breaking the laws of probabilities in Zimbabwe. How can we keep breaking inflation records? How many currencies can we run into the ground? The ZW$ is crashing hard right now.
We reintroduced the ZW$ back in 2018 and it started life on par with the USD. It is crazy to consider how far the ZW$ has fallen since then.
While black market rates will not be uniform across the whole country, below are rates I’m seeing from a few places:
- Ecocash, OneMoney, Swipe, ZIPIT: $18,500
- RBZ Auction: $14,200
- Cash: $5,000
- Willing Buyer Willing Seller (WBWS): $14,320.42
- Gold: $15,411.78
- Bulk Auction: $5,903.39
- Black Market Buy: $15,500
- Black Market Sell: $18,500
- Mosi oa Tunya Gold Coin: $15,417.93
The mere fact that we have all these rates illustrates the problem. It’s all a bit chaotic. It appears the market believes 1:18,500 is the correct rate, a 30% premium over the official bank rate (WBWS).
So we went from 1:1 in 2019 to 1:18500 today. My friend, a single Zimbabwean dollar was worth US$1 in 2019 but is now worth half a US cent, US$0.005. At this point if I created my own currency it would be worth more than that.
Loyalty rewards and even supermarket change tokens are worth more than that because they are pegged in USD.
Of course, such rapid currency depreciation always comes with a friend – high inflation. Normally currency depreciation is a symptom of high inflation but in Zimbabwe, they feed off each other.
The world’s highest inflation rate
Our old friend, Professor Hanke has been fascinated by Zimbabwe since our hyperinflation era in the noughties. As he was then, he still calculates what he believes to be the actual inflation rate in the country, which is almost always significantly higher than the official figure.
The current difference between official figures and Hanke’s is ridiculous. The govt says it’s 34.8% whilst Hanke calculates it at 1367%.
We have to take a moment and consider that there are a number of wars raging on the planet and several countries are engaged in armed conflict.
Yet, dear old peaceful Zimbabwe has worse inflation than them all. Sudan is embroiled in a bloody conflict and somehow they are managing their inflation better than us. Make it make sense.
The tweet that went along with the latest dashboard by Hanke simply said,
Welcome to Zimbabwe, home to the WORLD’S HIGHEST INFLATION RATE — A STUNNING 1,397%/yr. It’s time for Finance Minister Mthuli Ncube to resign.
What do you think? Is it time for our Honourable Minister of Finance, Mthuli Ncube to pack it in? Should there be a clause in the Finance Minister’s contract that says if inflation reaches a certain threshold, the Minister is automatically removed from office?
There isn’t such a clause but if 1397% leads to business as usual, what will actually lead to personnel changes? Will anything ever lead to personnel changes? My memory might be shaky but you tell me if there were any personnel changes back when we hit crazy hyperinflation in 2008.
That said, Mthuli and his principal are not sitting on their laurels. They are busy trying to arrest the situation. Recently, they told us about their grand scheme to turn the ZW$’s fortunes around – the structured currency.
They will have to forgive us if we are a little sceptical that it will work as intended. We are justified in being sceptical. They have already tried a lot of innovative stuff to no avail. Remind yourself of what we have been through with the timeline below.
Timeline of major monetary policy shenanigans since 1980:
1980:
- Rhodesian Dollar: Following independence, Zimbabwe adopts the existing Rhodesian dollar and renames it the Zimbabwe dollar (ZWD).
2003:
- Bearer Cheques: Due to cash shortages, Zimbabwe issues low-denomination bearer cheques to supplement the ZWD.
2006:
- High-denomination Bearer Cheques: As inflation worsens, the government introduces a second series of higher-denomination bearer cheques (up to 10 trillion ZWD) alongside the ZWD.
2008:
- Hyperinflation: Hyperinflation renders the ZWD and bearer cheques virtually worthless.
- Multi-Currency System: To address hyperinflation, Zimbabwe adopts a multi-currency system, allowing the legal use of various foreign currencies, including the USD, EUR, GBP, and ZAR. The ZWD is officially demonetised.
2016:
- Bond Notes: The government introduces bond notes, officially pegged to the USD, as a surrogate currency to ease cash shortages. Critics argue they are essentially a new form of ZWD.
2018:
- RTGS Dollar: Zimbabwe reintroduces a local currency, the RTGS dollar (real-time gross settlement dollar), initially existing only as electronic money. It’s intended to gradually replace the USD and other foreign currencies.
2019:
- USD Outlawed in Local Transactions: The government attempts to demonetise the USD within Zimbabwe, but the policy fails spectacularly.
2022:
- Gold Coins: The RBZ launches Mosi oa Tunya gold coins in an effort to stabilise the RTGS dollar.
2023:
- Gold-Backed Digital Currency: Zimbabwe introduces a gold-backed digital currency alongside the RTGS dollar.
2024:
- Structured currency: Zimbabwe announces a new currency system that links its exchange rate to a hard asset. The system to be monitored by a currency board that regulates the growth of domestic liquidity. The value of the asset that backs the currency constrains the growth of liquidity.
The country has wrestled with hyperinflation, currency shortages, and attempts to introduce new forms of local currency alongside the USD. We have soundly lost that wrestling match.
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