Zimbabwe, a landlocked country in Africa, has the capital city in Harare where major economic decisions are made. The economy has been performing poorly leading to their currency loosing value. Inflation then hyperinflation hit millions of percent. The hyperinflation was contributed by poor economic policies, unrestricted printing of currency notes and corruption. The consequence is that Zimbabwe is the only country where currency of other countries is more acceptable than their own currency.
What Currency Is in Use in Zimbabwe Today?
The Zimbabwean dollar was officially suspended in April 2009. In its place, currencies from various countries were adopted. These currencies include the United States dollar, South African Rand, Indian Rupee, Botswana Paula, Australian Dollar, United Kingdom's pound sterling, Chinese renminbi, as well as the Euro. However, all official government transactions are conducted using the United States dollar. In 2016, the Zimbabwean bond was introduced. The bond was as per the value of two and five US dollars
History of the Zimbabwean Dollar
The dollar was introduced in 1980 to replace the Rhodesian Dollar. The dollar was stable until various omissions and commissions led to it becoming one of the poorest performing currencies in the world. The currency value has eroded over the years becoming one of the lowest valued currencies in the world. In 2015, the Zimbabwean dollar was demonetized.
Re-denomination of the Zimbabwean Dollar
The redenomination of the Zimbabwean dollar has been done thrice. The first redenomination happened in August 2006 in spite of the economy not recording any growth. The initial dollar was redenominated at the ratio of 1000:1 to the second dollar. When measured against the US Dollar, the new dollar (second Zimbabwean dollar) was devalued at 60%.
In July 2008, the second redenomination took place making the currency more worthless. There was a shortage of the new currency both in notes and coins. Business people refused to take such currency making the government allow some retailers to accept foreign currency. Foreign currency became widely acceptable in September 2008. The US Dollar and South African Rand began circulating. The rate of inflation kept on rising forcing the government to print more bank notes of up to ten zeros.
The third redenomination occurred in February 2009. In the new legal tender, 1,000,000,000,000 Zimbabwean dollars were to be exchanged with for one new dollar (ZWL). Despite the redenomination, the economy deteriorated further. In January 2009, it was announced that Zimbabweans were free to trade using any currency in addition to the fourth dollar. Later in April 2009, the fourth dollar was suspended and people were free to use any currency.
Hyperinflation In Zimbabwe
By early 2000s, Zimbabwe started experiencing hyperinflation. The unsustainable situation grew rapidly leading to the government ceasing to announce inflation figures publicly since the rate was skyrocketing. In short, there was an economic meltdown. By 2008, the inflation rate was over 100,000%. By July 2008, it was at 250,000,000%, the highest ever in the world. Unfortunately, the reserve bank of Zimbabwe printed more bank notes in a bid to counter the dwindling value of their dollar. That was the time that a 100 Million Zimbabwean dollar was printed.
Demonetization of the Zimbabwean Dollar
When the use of foreign currencies was made legal in 2009, prices of commodities began to stabilize. In January 2014, the Central bank announced that currencies of other countries were acceptable. The Reserve Bank of Zimbabwe offered to exchange their dollar for the US dollar at the rate of 1 USD to 35 quadrillion Zimbabwean dollars. The aim was to stabilize the economy by establishing a credible anchor to curb inflation. The return of the Zimbabwean dollar will only take place once major economic fundamentals are addressed.