By Staff Reporter
One of the few central banks to make 1920s Germany look like a period of monetary prudence and stability is finally ditching its national currency.
The Reserve Bank of Zimbabwe said that it will begin a process to “demonetise” its all-but-worthless currency on June 15. The move was planned by the minister of finance and economic development last year and the process is expected to be complete by September 30.
Within that window, the notes can be exchanged for US dollars. After that they will be worthless — which is not so different from their value now: the RBZ said that accounts “with balances of zero to Z$175 quadrillion will be paid a flat US$5”.
“Hyperinflation” does not begin to explain the monetary problems in Zimbabwe, which denominates currencies with 15 zeroes.
Zimbabwe’s Central Statistics Office had stopped publishing estimates of price rises in 2008. At the time, inflation in the Robert Mugabe-led country were rising at an annual rate of 231m per cent.
To purchase goods many Zimbabweans were largely dependent on access to US dollars and the South African rand that came through remittances sent by migrant workers.
In 2009, Zimbabwe adopted the dollar as its main currency.
In 2014, the Chinese yuan, the Indian rupee, the Japanese yen and the Australian dollar were also adopted as legal tender by the Zimbabwean government.
The RBZ said on Friday that the decision to retire the currency has “been pending and long outstanding since 2009”.
Zimbabwe’s economic woes are traced back to veteran President Robert Mugabe’s decision to implement a controversial land reform programme that led to the forced-seizure — often violent — of white-owned farms in 2000. That led to the collapse of the crucial agricultural sector, while human rights abuses and oppression of the opposition led Western nations to impose a raft of sanctions against the southern African nation.
The economy spiralled into chaos, and as hyperinflation soared the country’s supermarket shelves lay empty, while the central bank printed Z$100tn notes that lost their value almost as soon as the ink dried. While sub-Saharan Africa enjoyed an average growth rate of more than 5 per cent between 2002 and 2012, Zimbabwe suffered a 2.6 per cent annual decline on average over the same period, according to the International Monetary Fund.
Zimbabwe — which once boasted one of Africa’s most industrialised economies — enjoyed a spurt of growth after Mr Mugabe’s Zanu-PF party and the opposition Movement for Democratic Change in 2009 agreed to set up a government of national unity following disputed elections.
But its economic travails have continued as political and policy uncertainty have combined to stymie its ability to attract the investment it requires to revitalise crumbling infrastructure and ailing industries. Some 4,600 businesses have closed in the past three years, according to the central bank, while unemployment and poverty are rife. The IMF forecasts annual growth of 2.8 per cent, down from an estimated 3.2 per cent in 2014, but some economists warn that the country is at risk of slipping back into recession.
Mr Mugabe, meanwhile, retains an iron-like grip on power. The 91-year-old, who has ruled Zimbabwe since independence from Britain in 1980, was last year re-elected unopposed to lead Zanu-PF for another five years. That means he could lead the party into 2018 and extend his more than three-decade hold on power.