Saturday, August 09, 2008

Zimbabwe's Growing the Wrong Way

Zimbabwe is growing indeed but it is growing the wrong stuff - inflation!

The latest report is that Zimbabwe's inflation has shot up to 2,200,000%. Bear in mind that this is an official figure from the government itself. Malaysia's official inflation figure is only at 7% but to me it should be much higher also, say between 10% to 20%. I'm sur many Malaysians will agree to that.

Zimbabwe's economy is really nosediving to an abyss, a place with no bottom. It was at one point, one of the richest country in Africa. Now, it's one of the worst in the world.

I followed closely on this situation not because I'm in Africa at the moment but more so of how are the citizens going to maintain their livelihood with such circumstances. It's really beyond everyone's expectation and ability.

To counter the effect of the high inflation, the Zimbabwean government kept issuing higher currency notes. Was it the right way in economic strategy in which case I'm not agreeable with it.

In January 2008 - Zimbabwean $10 million dollar note.
April 2008 - Z$50 million dollar note
May 2008 - Z$100 million, Z$250 million and Z$500 million dollar notes
June 2008 - Z$5 billion, Z$25 billion and Z$50 billion dollar notes

Reason for the issuance of new dollar notes was because prices for everything have risen so fast that in order to pay for those goods or services, you need to carry a suitcase wherever you go in order to get what you want.

So, by issuing larget note denomination, citizens only need to carry lesser monies. Guess how much is Z$500 million? It's only US$2.00.

As inflation shot up to 2,200,000% percentage, the Zimbabwean government has to issue the Z$100 billion to counter it.

Unfortunately, it was not enough fast enough as taking a public bus from the city centre back to home after work would have cost Z$250 billion dollars. One loaf of white bread is already Z$200 billion dollars. How to survive?

How now? The Zimbabwean government came up with a brilliant idea this time. They would issue new notes again but this time they will cancel the multiple zeroes. Effective 1 Aug 2008, Zimbabweans will need to go to the banks to convert their millions or billions of dollars at a rate of Z$10 billion = 1 Zimdollar.

Suddenly, a multi-billionaire could become a normal person overnight.

In Sudan itself, it's almost similar. It was 1,000 Sudanese Dinar = US$5.00. Then they changed by issuing new notes to 2 Sudanese Pound = US$1.00. Such African nations' exchange rates are not recognised internationally. Their currencies are not traded outside of their country therefore they can implement whatever denominations as they like.

This stack of Sudanese pound was equivalent to about US$12,000. It was to pay off certain expenses.
Tags: Zimbabwe, Africa, Inflation, Zimbabwean Dollar, Zimdollar, Sudanese Dinar, Sudanese Pound , Economics



Blogger Unknown said...

omg large the value of the notes!!!!..

11 August, 2008 08:46  
Anonymous Anonymous said...

wow ..tis is true? i saw it in a forwarded email and i had my doubt.. it is crazy..!

11 August, 2008 10:23  
Blogger Simon Ho said...

wow... looks like i can be a billionaire in zimbabwe much more faster than in the indonesian islands

11 August, 2008 21:41  
Blogger Johnny Ong said...

nkw@i - its way out of control

cbenc - hehe, verified by me now with so many facts

simon - in zimbabwe, its instant but dont think u can survive in that country long enough

12 August, 2008 22:58  
Anonymous Anonymous said...

Oh gosh i wont survive there.... I lost count on anything that is with more than 6 digits....No kidding!!

28 August, 2008 15:40  
Blogger limcyam said...

... it's cheaper to use the money to wipe you 'backside' after nature's call.

You know, tissue cost millions...

28 August, 2008 16:48  

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