Zimbabwe dollar dead, says top economist

The Zimbabwe dollar is dead, one of the world's leading experts on hyperinflation said today.

• The comments came as the Morgan Tsvangirai appointed Tendai Biti, one of his party’s highest ranking officials, to be the country’s new finance minister in a government of national unity.
• Professor Steve Hanke, a senior fellow of the Cato Institute in Washington, has been involved with the governments and currency reforms of a dozen different countries around the world, and in 2007 developed a hyperinflation index for Zimbabwe.
• It used stock market and other non-cash transactions to derive an inflation figure that bypassed the desperate shortages of goods in shops and actual banknotes, and peaked at an annual 89.7 sextillion per cent in November last year – after which it became impossible to calculate.
• At the time the daily inflation rate stood at 98 per cent, with prices doubling every 24.7 hours.
• As the Zimbabwe stock exchange had stopped trading and the non-cash banking system seized up, he said, reliable data disappeared. “The non-cash Zimbabwe dollar is, therefore, dead,” he said.
• “Ashes are all that is left of the Zimbabwe dollar – a remnant of paper money,” he said in a commentary on the Cato Institute website.
• “Even though the Zimbabwe paper money remnant circulates alongside foreign currencies, its real value is tiny, its use is limited, and its value against the US dollar is cut in half every two days.” With their own currency becoming ever more worthless with every passing hour, those Zimbabweans with access to foreign exchange turned to it even for everyday transactions – supermarkets now price their products in US dollars.
• Finally the government bowed to economic reality last month and legalised the process of “dollarisation” – the replacement of local currency with the US dollar.
• Zimbabwe failed to break Hungary’s world record for hyperinflation, which it set at 195 per cent a day in 1946, but easily beat Yugoslavia’s 1994 mark of 313 million per cent a month to secure second place in the record books.