The Zimbabwean dollar ($, or Z$ to distinguish it from other dollar-denominated currencies) was the official currency of Zimbabwe between 1980 and 12 April 2009.
Although the dollar was considered to be among the highest valued currency units when it was first introduced in 1980 to replace the Rhodesian dollar at a ratio of 1:1, political turmoil and hyperinflation rapidly eroded the value of the Zimbabwe dollar to eventually become one of the least valued currency units in the world. Despite attempts to control inflation by legislation and three separate redenominations in 2006, 2008 and 2009, the use of the dollar as an official currency was effectively abandoned on 12 April 2009 as a result of the Reserve Bank of Zimbabwe legalising the use of foreign currencies for transactions in January 2009.
Currently, foreign currencies such as the South African Rand, Botswana Pula, Pound Sterling and the United States Dollar are widely used instead for nearly all transactions in Zimbabwe, and the current government of Zimbabwe has insisted that the Zimbabwean dollar should only be reintroduced if the industrial output improves.
The Zimbabwean dollar's predecessor, the Rhodesian dollar was essentially equal to half of a pound sterling when it was adopted during the decimalisation of 1970, the same practice which was used in other Commonwealth countries such as South Africa, Australia, and New Zealand. The selection of the name was motivated by the fact that the reduced value of the new unit correlated more closely to the value of the US dollar than it did to the pound sterling.
Introduction of the first dollar
The first Zimbabwean dollar was introduced in 1980 and replaced the Rhodesian dollar at par. The initial ISO 4217 code was ZWD. At the time of its introduction, the Zimbabwean dollar was worth more than the U.S. dollar, with ZWD 1 = USD 1.47. However, the currency's value eroded rapidly over the years. On 26 July 2006, the parallel market value of the Zimbabwean dollar fell to one million to the British pound.
Introduction of the second dollar
In October 2005, the head of the Reserve Bank of Zimbabwe, Dr. Gideon Gono, announced that "Zimbabwe will have a new currency next year." New banknotes and coins were to replace the then current Zimbabwean dollar. Gono did not provide a name for this new currency. In June 2006, Deputy Finance Minister David Chapfika stated that Zimbabwe had to achieve macroeconomic stability (i.e., double digit inflation) before any new currency was introduced.
The dollar was redenominated on 1 August 2006 at the rate of 1 revalued dollar = 1000 old dollars. The new dollar was subdivided into 100 cents, although cents were not used in practice. Together with the redenomination, the government devalued the dollar by 60% against the US dollar (see exchange rate history table below), from 101,000 old dollars (101 revalued) to 250 revalued dollars. ISO originally assigned a new currency code of ZWN to this redenominated currency, but the Reserve Bank of Zimbabwe could not deal with a currency change. Therefore the currency code remained 'ZWD'. The revaluation campaign, which Gideon Gono named "Operation Sunrise" was completed on 21 August 2006. It was estimated that some ten trillion old Zimbabwe dollars (22% of the money supply) were not redeemed during this period.
On 12 December 2006, Dr. Gono hinted in a memorandum to banks and other financial institutions that he would lay out the next phase of his monetary reforms dubbed Project Sunrise Two when he announced the monetary policy review statement in January 2007. It was not possible to get immediate confirmation from Gono's office whether the memorandum was advice to banks that he would be launching the new currency in January. But the chief executive officer of one of the country's largest banks said industry players had understood the governor's memo to mean new money would be introduced next month. A possible name appeared to be "ivhu", which means "soil" in Shona.
The following year, on 2 February 2007, the RBZ revealed that a new (third) dollar would be released soon and gave some details of the new banknotes (see below). However, with inflation at the time still in the four digits, the banknotes remained in storage. During the same month, the Reserve Bank of Zimbabwe declared inflation illegal, outlawing any raise in prices on certain commodities between 1 March and 30 June 2007. Officials arrested executives of some Zimbabwean companies for increasing prices on their products. Economists generally suspect that such measures are ineffective at eliminating the problem in the long term.
Economist Eddie Cross reported on 15 June 2007 that "There is talk that the Reserve Bank will cut another three zeros off our currency next week and this would mean that one Zimbabwe dollar would now equal one million of the old dollars. Chaos reigns in commerce and industry and those in the public sector are frantic."
The Zimbabwe dollar was again devalued on 6 September 2007, this time by 92%, to give an official exchange rate of ZW$30,000 to US$1, although the black market exchange rate was estimated to be ZW$600,000 to US$1.
Meanwhile the WM/Reuters company introduced a notional exchange rate (ISO ZWN) which more accurately reflected black market exchange rates. Since there was a shortage of foreign exchange in the country the official rate was nearly impossible to obtain. The method of calculation was based on Purchasing Power Parity utilizing the dual listing of companies on the Harare (ZH) and London Stock exchanges (LN).
Introduction of the third dollar
Reserve bank governor Gideon Gono announced on 30 July 2008 that the Zimbabwean dollar would be redenominated. Effective August 1, 2008, ZW$10 billion would be worth ZW$1; the new currency code was ZWR. The planned denominations to be issued are coins valued Z$5, Z$10 and Z$25 and banknotes worth Z$5, Z$10, Z$20, Z$100 and Z$500. While the German firm of Giesecke & Devrient was no longer printing Zimbabwean currency, The Daily Telegraph reported that the new currency was printed before the relationship was severed and had been kept in storage since then.
Due to frequent cash shortages and the worthless Zimbabwean dollar, foreign currency was effectively legalised as a de facto currency on 13 September 2008 via a special program to officially license a number of retailers to accept foreign money. This reflected the reality of the dollarization of the economy, with many shop keepers refusing to accept Zimbabwe dollars and requesting U.S. dollars or South African rand instead. Despite redenomination, the RBZ was forced to print banknotes of ever higher values to keep up with surging inflation, with ten zeros reappearing by the end of 2008 (see below).
Introduction of the fourth dollar
On February 2, 2009, the RBZ announced that a further 12 zeros were to be taken off the currency, with 1,000,000,000,000 (third) Zimbabwe dollars being exchanged for 1 new (fourth) dollar. New banknotes were introduced with a face value of Z$1, Z$5, Z$10, Z$20, Z$50, Z$100 and Z$500. The banknotes of the fourth dollar circulated alongside the third dollar, which had to remain legal tender until 30 June 2009. The new currency code was ZWL.
The Zimbabwean dollar had become largely irrelevant, with the economy being almost completely dollarised. Even the national postal service, Zimpost, was said to be charging customers postage in US Dollars, even though some of the stamps were in Zimbabwean Dollar denomination.
Zimbabwe finance minister, Tendai Biti, said in his first budget report, "The death of the Zimbabwe dollar is a reality we have to live with. Since October 2008 our national currency has become moribund."
In late January 2009, acting Finance Minister Patrick Chinamasa announced that all Zimbabweans would be allowed to conduct business in any currency as a response to the hyperinflation crisis.
On April 12, 2009, media outlets reported that economic planning minister Elton Mangoma had announced the suspension of the local currency "for at least a year", effectively terminating the fourth dollar.
Rampant inflation and the collapse of the economy have severely devalued the currency, with many organizations using the US dollar, the euro, the pound sterling, the South African rand, or the Botswana pula instead. Early in the 21st century, Zimbabwe started to experience hyperinflation. Inflation reached 623% in January 2004, then fell back to low triple digits in 2004 before surging to 1,281.1% in 2006.
Inflation reached another record high of 3714% (year-on-year) in April 2007. The monthly rate for April 2007 exceeded 100%, implying that inflation may soon exceed all forecasts, as 100% monthly inflation over sustained 12 months would produce annual inflation of over 400,000%. Mid-year inflation for 2007 has been breaching records as inflation for May 2007 was estimated at 4,530% (year-on-year).
On 21 June 2007, the United States ambassador to Zimbabwe, Christopher Dell, told The Guardian newspaper that inflation could reach 1.5 million percent by the end of the year. The unofficial inflation rate at that time was above 11,000%, and the black-market exchange rate was Z$400,000 to the pound.
On 13 July 2007, the Zimbabwean government said it had temporarily stopped publishing (official) inflation figures, a move that observers said was meant to draw attention away from "runaway inflation which has come to symbolise the country's unprecedented economic meltdown."
On 27 July 2007, the Consumer Council of Zimbabwe (CCZ) said its recent calculations for the monthly expenditure for an urban family of six showed that inflation for the month of June was more than 13,000%. The Central Statistical Office (CSO), the official source of Consumer Price Index numbers, had not released its figures since February (2007) when it reported annual inflation at 1,729%.
In September 2007, the Central Statistical Office announced an official inflation rate of 6,592.8% for August 2007. Private estimates were as high as 20,000%. In October 2007, they announced an official inflation rate of 7,892.1% for September 2007. In November 2007, they announced an official inflation rate of 14,840.5% for October 2007.
On 27 November 2007, the chief statistician of the Central Statistical Office, Moffat Nyoni, announced that it would be impossible to calculate the inflation rate of the dollar any further. This was due to the lack of availability of basic goods, and subsequent lack of information from which to calculate the inflation rate; plus, most computers had an insufficient number of digits and software. The International Monetary Fund has stated that inflation is predicted to rise to 100,000% per annum.
On 14 February 2008, the Central Statistical Office announced that the inflation rate for December 2007 was 66,212.3%, and the unofficial exchange rate was Z$7.1 million to the US$1.
On 20 February 2008, the Central Statistical Office said that officially, inflation has in January 2008 gone past the 100,000% mark to 100,580.2%.
On 4 April 2008, the Financial Gazette (FinGaz) reported that officially, inflation in February 2008 jumped to 164,900.3%.
On 15 May 2008, the Zimbabwe Independent reported that officially, inflation in March 2008 jumped to 355,000%.
On 21 May 2008, SW Radio Africa reported that, according to an independent financial assessment inflation in May 2008 jumped to 1,063,572.6%. The state statistical service has said there are not enough goods in the shortage-stricken shops to calculate any new (official) figures.
On 26 June 2008, the Zimbabwe Independent reported that, latest figures from the Central Statistical Offices (CSO) showed that annual inflation rose by 7,336,000 percentage points to 9,030,000% by June 20 and was set to end the month at well above 10,500,000%.
The Sydney Morning Herald reported that inflation was likely to be 2 million percent in May 2008 and 10-15 million percent in June 2008, according to John Robertson, a respected Zimbabwean economist. Robertson estimated inflation in July 2008 to be 40-50 million percent. Inflation can only be estimated because of the impossibility of following the cost of individual goods.
According to Central Statistical Office statistics, annual inflation rate rose to 231 million percent in July 2008. The month-on-month rate rose to 2,600.2%. By December 2008, inflation was estimated at 6.5 quindecillion novemdecillion percent (65 followed by 107 zeros).
As predicted by the textbook quantity theory of money, this hyperinflation has been caused primarily by the Reserve Bank of Zimbabwe's choice to mushroom the money supply.
Since February 2009, following a period of hyperinflation and widespread rejection of the devalued currency, companies and individuals are permitted to transact domestic business in other currencies, such as the US dollar or the South African rand. In consequence, the Zimbabwean economy has undergone dollarization and the Zimbabwean dollar has fallen out of everyday use.
Money supply (2006–2008)
On 16 February 2006, the governor of the Reserve Bank of Zimbabwe, Gideon Gono, announced that the government had printed ZW$20.5 trillion in order to buy foreign currency to pay off IMF arrears. In early May 2006, Zimbabwe's government announced that they would produce another ZW$60 trillion. The additional currency was required to finance the recent 300% salary increase for soldiers and policemen and 200% increase for other civil servants. The money was not budgeted for the current fiscal year, and the government did not say where it would come from. On 29 May, Reserve Bank officials told IRIN that plans to print about ZW$60 trillion (about US$592.9 million at official rates) were briefly delayed after the government failed to secure foreign currency to buy ink and special paper for printing money.
In late August 2006, it was reported that about ZW$10 trillion old dollars (22% of the money supply) had not been exchanged for revalued dollars. These bearer cheques were demonetised.
On 27 June 2007, it was announced that central bank governor Gideon Gono had been ordered by President Robert Mugabe to print an additional ZWD$1 trillion to cater for civil servants' and soldiers' salaries that were hiked by 600% and 900% respectively.
On 28 July 2007, it was reported that Mugabe has said that Zimbabwe will go on printing money if there is not enough for underfunded municipal projects.
On 30 August 2007, it was reported that an additional ZW$3 trillion had been printed to pay for 500,000 scotch carts and 800,000 ox-drawn ploughs plus an unspecified number of cattle.
On 3 September 2007, it was reported that that the black market in Zimbabwe is once again booming despite price controls. People who previously were employed for US$11 (ZW$2 Million) a month are now able to turn as much as US$166 (ZW$30 Million) just through black market trading.
On 24 November 2007, it was reported that money supply was now $58 trillion revalued Zimbabwean dollars (ZWD) ($41 million US at parallel rates). However, Zimbabwe banks could only account for $1 to $2 trillion of those dollars, meaning that members of the public were holding $56 to $57 trillion in cash.
On 4 January 2008, it was reported that money supply had been increased by $33 trillion (to $100 trillion) revalued Zimbabwean dollars (ZWD) Further, the demonetization of the $200,000 bearer cheques was put on hold, thus increasing the money supply.
A selection of Reserve Bank of Zimbabwe bearer cheques printed between July 2007 to July 2008 (now expired) that illustrate the hyperinflation rate in Zimbabwe.
The planned issue of additional banknotes (denominations of ZWD 1, 5, and 10 Million) on 18 January 2008 will increase the money supply by an unknown amount.
On 21 January 2008, it was reported, by Gideon Gono, that the money supply had been increased to ZW$170 trillion since the middle of December. Further, Gono expected it to reach $800 trillion by 28 January 2008.
On 1 March 2008, it was reported that documents obtained by The Sunday Times show the Munich company Giesecke & Devrient (G&D) was receiving more than €500,000 (£382,000) a week for delivering bank notes equivalent to $170 trillion a week.
“The regime is surviving by printing money: at this stage there is no other way.
Martin Rupiya, professor (war and security studies), University of Zimbabwe.”
According to a source at the Reserve Bank of Zimbabwe, G&D was delivering 432,000 sheets of banknotes every week to Fidelity printers in Harare, where they were stamped with the denomination. Each sheet contains 40 notes and the current production is entirely in Z$10M notes. On 1 July 2008, Giesecke & Devrient responded to pressure from the German government by suspending production of bank notes for Zimbabwe.
In the Guardian, on 18 July 2008, a report on Zimbabwe's inflation, said that an egg costs ZW$50 billion (GBP 0.17, USD 0.32), and it showed adverts for prizes of Z$100 trillion in a Zimbabwean derby and ZW$1.2 quadrillion ($1,200,000,000,000,000.00: approx. GBP 2,100; USD 4,200) in a lottery. It also showed a monthly war pension currently is ZW$109 billion (GBP 0.37, USD 0.74), shops can only cash cheques if the customer writes double the amount, because the cost will go up by the time the cheque has cleared, and people can only withdraw a maximum of ZW$100 billion from cashpoints.
On 23 July 2008, an Austro-Hungarian company based in Vienna confirmed that it is providing the Reserve Bank of Zimbabwe with the licences and software required to design and print Zimbabwe currency. The company, named Jura JSP, said it would consider ending its supply of licences and software if the European Union required it to do so. Without the licences and software, the Reserve Bank of Zimbabwe may be unable to print notes in larger denominations than are already in circulation.
On 24 July 2008, the Reserve Bank of Zimbabwe announced that "appropriate measures are being put in place to address the current setbacks being faced on the currency front, as well as on financial and accounting systems." It promised that in "the next few days" it would institute changes to the minimum cash withdrawal limits and IT systems' constraints. Currently, the government limits cash withdrawals to ZW$100 billion per day, which is less than the cost of a loaf of bread. IT systems cannot handle such large numbers; the automated teller machines for one major bank give a "data overflow error" and freeze customers attempt to withdraw money with so many zeros. That same day, the Institute of Commercial Management reported that ZW$1.2 trillion is worth the same as one British pound.
From January to December 2008, the money supply growth rose from 81,143% to 658 billion percent.
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