18 July 2008

Zimbabwe -- Out of Control Inflation

The tragedy that is Zimbabwe sees the official inflation rate stated at 2.2 million percent. This is the rate used by the Zimbabwean Central Bank. The unofficial rates suggest that at some point over the previous 12 months the inflation rate has been as high as 70 million percent. External analysts to the Central Bank estimate inflation to be running at about 12.5 million percent.

The constant instability that afflicts Zimbabwe is contributing to the continual spiking inflation rate. If Robert Mugabe loved Zimbabwe and Zimbabwean independence half as much as he says he does then he would step down immediately and allow some normalcy to return to the political spectrum. Unfortunately, Mugabe is an egotistical narcissistic dictator and tyrant who has no interest in anything but his own legacy. This legacy will never be viewed in a positive light. Any positives that he might have acquired in the early years have been erased, utterly and completely.

One job that I would most definitely not want is that of Governor of the Central Bank of Zimbabwe. Trying to formulate financial policy in an economic environment that sees inflation running in the millions of percent is not only a challenge but impossible if current conditions persist much longer. Nevertheless, Gideon Gono (pictured), Central Bank Governor, ploughs forward. Most of his statements seem to firmly cast the blame on the exponential rise in inflation on the black market and profiteers.

Basic goods such as soap and cooking oil have increased 70 million and 60 million percent respectively. Sugar is up some 36 million percent. The Central Bank is introducing a coupon system to ensure that the need will get some access to basic necessities.

The official exchange rate has the USD 1 buying 20 million Zimbabwe dollars. However, the black market rate which is more likely to reflect the real exchange value of Zimbabwean Dollars has USD 1 buying some 90 million Zimbabwe Dollars.

I have this sinking feeling that things are going to get worse in Zimbabwe before they get better.

7 comments:

GJ said...

Hyper inflation, it really does matter what number you put on the rate it just means your money is worthless. The government knows that a now have a coupon scheme to replace the useless money.

The job I wouldn't like in Zimbabwe is just trying to feed myself and family as an average "joe" on the street, not a government official who, no doubt has contacts to supply him with what he needs.

Not opinion, fact!!

GJ said...

OOPS does = doesn't in first line

Sorry rushing again!!

Rob Baiton said...

GJ...

I figured that does = doesn't :D

Yeah, I agree on the "Average Joe" point. The man and woman and child on the street have it much tougher than the Governor of the Central Bank does when it comes to meeting the basic necessities to sustain life.

I was trying to highlight the mess that the financial system is in and that I would not take the job for quids (at least while Mugabe was hanging around).

There was no intention to belittle the suffering of the little people.

GJ said...

Yeah his job would be infinately easier if the mad man was got!!!

They can recover it has been done before with failed states, they just need new leadership and lots of help.

pjbali said...

Hi Rob

I happenned to pass through Harare a few years back as a result of a missed flight connection. One thing I noticed is that Harare Looks like a nice town - clean streets, good infrastructure etc..It was just that the streets were empty and everthing was closed up. Back then I changed some 10 USD for 780,000 zim dollars - however a coffee would run you 80,000 and the cake to go with with it another 100,000. Can't imagine what its like now. I did smuggle out a few hundred thousand (as a souvenir) while I was there. Its illegal to take money out of country but the customs folks were more interested in USD than Zim Dollars.

Rob Baiton said...

There is no doubt that Zimbabwe can recover! It was the bread basket of Africa and can be again!

Rob Baiton said...

PJ...

I am not surprised that the customs officers are more interested in USD as they are a little easier to conceal than a huge wad of Zimbabwean dollars. Although, I think there is a 10 million dollar note now.