Latest update: February 9, 2009
R.I.P. Zimbabwe Dollar
Steve H. Hanke*
Professor of Applied Economics
The Johns Hopkins University
The Cato Institute
As I wrote on 25 June 2008, “Zimbabwe is in the late stages of a classic hyperinflation. … Inflation is galloping ahead as the supply of Zimbabwe dollars surges and the demand for them shrinks. Eventually, the currency will totally collapse as people simply refuse to accept it.” In recent months, facts on the ground have validated this prognostication. The Zimbabwe dollar is dead.
Last year, I developed a hyperinflation index for Zimbabwe. The index began on 5 January 2007, a month before Zimbabwe entered the hyperinflation zone. Due to a lack of reliable data, I stopped reporting the index on 14 November 2008. This index was based on non-cash Zimbabwe dollar transactions. These had accounted for the bulk of transactions in Zimbabwe. By the end of November, however, there were virtually no non-cash Zimbabwe transactions taking place and the Zimbabwe Stock Exchange had stopped trading. The non-cash Zimbabwe dollar is, therefore, dead.
Ashes are all that is left of the Zimbabwe dollar — a remnant of paper money. During Zimbabwe’s hyperinflation, foreign currencies replaced the Zimbabwe dollar in a rapid and spontaneous manner. This “dollarization” process was legalized in late January 2009. 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 U.S. dollar is cut in half every two days.
Zimbabwe failed to break Hungary’s 1946 world record for hyperinflation. That said, Zimbabwe did race past Yugoslavia in October 2008. In consequence, Zimbabwe can now lay claim to second place in the world hyperinflation record books.
Highest Monthly Inflation Rates in History Country Month with highest inflation rate Highest monthly inflation rate Equivalent daily inflation rate Time required for prices to double
Hungary July 1946 1.30 x 1016% 195% 15.6 hours
Zimbabwe Mid-November 2008 (latest measurable) 79,600,000,000% 98.0% 24.7 hours
Yugoslavia January 1994 313,000,000% 64.6% 1.4 days
Germany October 1923 29,500% 20.9% 3.7 days
Greece November 1944 11,300% 17.1% 4.5 days
China May 1949 4,210% 13.4% 5.6 days
Source: Prof. Steve H. Hanke, February 5, 2009.
New Hyperinflation Index (HHIZ) Puts Zimbabwe Inflation at 89.7 Sextillion Percent
Steve H. Hanke*
Professor of Applied Economics
The Johns Hopkins University
The Cato Institute
Zimbabwe is the first country in the 21st century to hyperinflate. In February 2007, Zimbabwe’s inflation rate topped 50% per month, the minimum rate required to qualify as a hyperinflation (50% per month is equal to a 12,875% per year). Since then, inflation has soared.
The last official inflation data were released for July and are hopelessly outdated. The Reserve Bank of Zimbabwe has been even less forthcoming with money supply data: the most recent money supply figures are ancient history—January 2008.
Absent current official money supply and inflation data, it is difficult to quantify the depth and breadth of the still-growing crisis in Zimbabwe. To overcome this problem, Cato Senior Fellow Steve Hanke has developed the Hanke Hyperinflation Index for Zimbabwe (HHIZ). This new metric is derived from market-based price data and is presented in the accompanying table for the January 2007 to present period. As of 14 November 2008, Zimbabwe’s annual inflation rate was 89.7 Sextillion (1021) percent.
Since mid-November 2008, the weekly update of the HHIZ has been put on hold. The market-based price data from Zimbabwe have deteriorated and, at present, cannot be used to update the HHIZ. HHIZ updates will be resumed as soon as the quality of the data reaches a satisfactory level.
*Steve H. Hanke is one of the world’s leading experts on exchange-rate regimes. He has played a prominent role in designing and implementing monetary reforms that have stopped very high or hyperinflations in eight countries.
Hanke Hyperinflation Index for Zimbabwe (HHIZ) Date Index Monthly Inflation Rate Annual Inflation Rate
5-Jan-07 1.00 13.70%
2-Feb-07 1.78 77.60%
2-Mar-07 3.14 76.70%
5-Apr-07 6.90 56.20%
4-May-07 6.75 -2.15%
1-Jun-07 20.70 207.00%
6-Jul-07 53.00 60.40%
3-Aug-07 49.10 -7.29%
7-Sep-07 82.50 70.60%
5-Oct-07 219.00 165.00%
2-Nov-07 642.00 193.00%
28-Dec-07 2,010.00 61.50% 215,000%
25-Jan-08 2,250.00 11.80%
29-Feb-08 8,260.00 259.00%
28-Mar-08 17,700.00 115.00%
25-Apr-08 57,100.00 222.00%
30-May-08 442,000.00 498.00%
26-Jun-08 23,600,000.00 5,250.00% 41,400,000%
4-Jul-08 49,200,000.00 3,740.00% 93,000,000%
11-Jul-08 81,800,000.00 2,080.00% 167,000,000%
18-Jul-08 122,000,000.00 1,030.00% 250,000,000%
25-Jul-08 157,000,000.00 566.00% 317,000,000%
29-Aug-08 6,330,000,000.00 3,190.00% 9,690,000,000%
26-Sep-08 794,000,000,000.00 12,400.00% 471,000,000,000%
3-Oct-08 3,570,000,000,000.00 15,400.00% 1,630,000,000,000%
10-Oct-08 32,300,000,000,000.00 45,900.00% 11,600,000,000,000%
17-Oct-08 1,070,000,000,000,000.00 493,000.00% 300,000,000,000,000%
24-Oct-08 124,000,000,000,000,000.00 15,600,000.00% 26,100,000,000,000,000%
31-Oct-08 24,600,000,000,000,000,000.00 690,000,000.00% 3,840,000,000,000,000,000%
7-Nov-08 4,890,000,000,000,000,000,000.00 15,200,000,000.00% 593,000,000,000,000,000,000%
14-Nov-08 853,000,000,000,000,000,000,000.00 79,600,000,000.00% 89,700,000,000,000,000,000,000%
Sources: Imara Asset Management Zimbabwe and author’s calculations.
A Note on Zimbabwe’s Official Inflation Rate
1. Numbers are reported with three significant figures.
2. The HHIZ is reported on the last trading day of the week.
3. The monthly inflation rate is HHIZ(t)/HHIZ(t-4) - 1 and the annual inflation rate is HHIZ(t)/HHIZ(t-52) - 1.
4. The HHIZ values are numerical estimates. In consequence, they are subject to revision when new price data are incorporated into the estimates.
5. Prof. Hanke would like to thank Alex Kwok for his research assistance on this project.
6. Prof. Hanke can be reached at his Johns Hopkins University office: (410) 516-7183 or email@example.com
"Zimbabwe: From Hyperinflation to Growth," by Steve H. Hanke, Development Policy Analysis no. 6, June 25, 2008.
"A Decade of Suffering in Zimbabwe: Economic Collapse and Political Repression under Robert Mugabe," by David Coltart, Development Policy Analysis no. 5, March 24, 2008.
"The Loss of Property Rights and the Collapse of Zimbabwe," by Craig J. Richardson, Cato Journal Vol. 25 No. 3, Fall 2005.
"How to Kill Zimbabwe's Hyperinflation," by Steve H Hanke, Global Dialogue, August 2008.
"Botswana and Zimbabwe: A Tale of Two Countries," by Marian L. Tupy, The American, May 14, 2008.
"Mugabe Is the Mobutu of Our Time," by Marian L. Tupy, Spectator, March 18, 2008.
"How the Loss of Property Rights Caused Zimbabwe's Collapse," by Craig Richardson, Economic Development Bulletin no. 4, November 14, 2005.
"Letter to the Editor: Central Banking Has Troubled Past," by Steve H. Hanke, Business Day, March 16, 2009.
"The Printing Press," by Steve H. Hanke, Forbes, December 5, 2008.
"Hyperinflation: Mugabe Versus Milosevic," by Steve H. Hanke, Globe Asia, August 2008.
"Kill Central Bank to Fix Inflation in Zimbabwe," by Steve H. Hanke, The Times, July 13, 2008.
"The Aid Africa Can't Afford," by Edward N. Luttwak and Marian L. Tupy, Los Angeles Times, July 8, 2008.
"The Spiral of Zimbabwe," by Marian L. Tupy, New York Sun, June 23, 2008.
"Mugabe's Best Friend," by Marian L. Tupy, Forbes.com, April 10, 2007.
"The Long Fall of Robert G. Mugabe," by Marian L. Tupy, The New Republic (Online), March 28, 2008.
"Peace Won't Come to Zimbabwe," by Marian L. Tupy and David Coltart, The Wall Street Journal, March 14, 2008.
"New Hope for Zimbabwe," by Tom Woods, Roger Bate and Marian L. Tupy, Washington Times, February 6, 2008.
"Free Banking for Zimbabwe," by Steve H. Hanke, Globe Asia, December 2007.
"Mugabe's Apologists," by Marian L. Tupy, Wall Street Journal Europe, December 11, 2007.
"Hyperinflation," by Steve H. Hanke, Forbes, May 17, 2007.
"The World’s Greatest Unreported Hyperinflation," by Steve H. Hanke, Globe Asia, May 2007.
"A Four-Step Recovery Plan for Zimbabwe," by Marian L. Tupy, American.com, April 17, 2007.
"Bureaucratic Heart of Darkness," by Marian L. Tupy, Washington Times, April 16, 2006.
"Mugabe Should Heed the Warnings of Hayek," by Marian L. Tupy, Financial Times, July 27, 2005.
"Power Sharing in Zimbabwe" featuring Marian L. Tupy, September 17, 2008 [Flash Audio, 06:27]
"Poverty and Economy in Mugabe's Zimbabwe" featuring Rejoice Ngwenya, August 14, 2008 [Flash Audio, 06:51]
"How Inflation Robs Zimbabwe" featuring Rejoice Ngwenya, July 29, 2008 [Flash Audio, 08:18]
"Mugabe's Power Grab in Overtime" featuring Marian L. Tupy, April 4, 2008 [Flash Audio, 08:02]
"Elections in Zimbabwe" featuring Marian L. Tupy, March 31, 2008 [Flash Audio, 06:18]
"Disastrous Health Situation in Zimbabwe" featuring Richard Tren, March 25, 2008 [Flash Audio, 08:45]
Marian L. Tupy discusses the Zimbabwe elections on BBC World News July 18, 2008 [Flash Video, 04:53]
Marian L. Tupy on Gallup discussing Zimbabweans' desire for change April 1, 2008 [Real Media, 03:02]
Marian Tupy on BBC World talking about Zimbabwe's elections March 28, 2008 [Flash Video, 05:04]
Marian Tupy on CNN International discussing Zimbabwe's elections March 28, 2008 [Flash Video, 05:22]
"Escaping Poverty in Sub-Saharan Africa," July 28, 2008 [Capitol Hill Briefing]
"Economic Collapse and Political Repression in Robert Mugabe's Zimbabwe," March 24, 2008 [Policy Forum]
"The Collapse of Zimbabwe in the Wake of the 2000-2003 Land Reforms," March 28, 2005 [Book Forum]
"Battle For Zimbabwe: The Final Countdown," Wednesday, June 30, 2004 [Book Forum]