Highest inflation in the world 2006

Discussion in 'Economics' started by Hook N. Sinker, Jan 19, 2007.

  1. http://www.nytimes.com/2006/05/02/w...f95916b4e5d098&ei=5088&partner=rssnyt&emc=rss

    HARARE, Zimbabwe, April 25 — How bad is inflation in Zimbabwe? Well, consider this: at a supermarket near the center of this tatterdemalion capital, toilet paper costs $417.

    No, not per roll. Four hundred seventeen Zimbabwean dollars is the value of a single two-ply sheet. A roll costs $145,750 — in American currency, about 69 cents.

    The price of toilet paper, like everything else here, soars almost daily, spawning jokes about an impending better use for Zimbabwe's $500 bill, now the smallest in circulation.

    But what is happening is no laughing matter. For untold numbers of Zimbabweans, toilet paper — and bread, margarine, meat, even the once ubiquitous morning cup of tea — have become unimaginable luxuries. All are casualties of the hyperinflation that is roaring toward 1,000 percent a year, a rate usually seen only in war zones.

    Zimbabwe has been tormented this entire decade by both deep recession and high inflation, but in recent months the economy seems to have abandoned whatever moorings it had left. The national budget for 2006 has already been largely spent. Government services have started to crumble.

    The purity of Harare's drinking water, siphoned from a lake downstream of its sewer outfall, has been unreliable for months, and dysentery and cholera swept the city in December and January. The city suffers rolling electrical blackouts. Mounds of uncollected garbage pile up on the streets of the slums.

    Zimbabwe's inflation is hardly history's worst — in Weimar Germany in 1923, prices quadrupled each month, compared with doubling about once every three or four months in Zimbabwe. That said, experts agree that Zimbabwe's inflation is currently the world's highest, and has been for some time.

    Public-school fees and other ever-rising government surcharges have begun to exceed the monthly incomes of many urban families lucky enough to find work. The jobless — officially 70 percent of Zimbabwe's 4.2 million workers, but widely placed at 80 percent when idle farmers are included — furtively hawk tomatoes and baggies of ground corn from roadside tables, an occupation banned by the police since last May.

    Those with spare cash put it not in banks, which pay a paltry 4 to 10 percent annual interest on savings, but in gilt-edged investments like bags of corn meal and sugar, guaranteed not to lose their value.

    "There's a surrealism here that's hard to get across to people," Mike Davies, the chairman of a civic-watchdog group called the Combined Harare Residents Association, said in an interview. "If you need something and have cash, you buy it. If you have cash you spend it today, because tomorrow it's going to be worth 5 percent less.

    "Normal horizons don't exist here. People live hand to mouth."

    President Robert G. Mugabe has responded to the hardship in two ways.

    Although there is no credible threat to his 26-year rule, Zimbabwe's political opposition is calling for mass protests against the economic situation. So Mr. Mugabe has tightened his grip on power even further, turning the economy over to a national security council of his closest allies. In addition, he has seeded the government's civilian ministries this year with loyal army and intelligence officers who now control key functions, from food security to tax collection.

    At the same time, Mr. Mugabe's government has printed trillions of new Zimbabwean dollars to keep ministries functioning and to shield the salaries of key supporters — and potential enemies — against further erosion. Supplemental spending proposed early in April would increase the 2006 spending limits approved last November by fully 40 percent, and more such emergency spending measures are all but certain before the year ends.

    On Friday, the government said it would triple the salaries of 190,000 soldiers and teachers. But even those government workers still badly trail inflation; the best of the raises, to as much as $33 million a month, already are slightly below the latest poverty line for the average family of five.

    This will only worsen inflation, for printing too many worthless dollars is in part what got Zimbabwe into this mess to begin with. Zimbabwe fell into hyperinflation after the government began seizing commercial farms in about 2000. Foreign investors fled, manufacturing ground to a halt, goods and foreign currency needed to buy imports fell into short supply and prices shot up.

    Inflation, about 400 percent per year last November, edged over 600 percent in January, but began to soar after the government revealed that it had paid the International Monetary Fund $221 million to cover an arrears that threatened Zimbabwe's membership in the organization.

    In February, the government admitted that it had printed at least $21 trillion in currency — and probably much more, critics say — to buy the American dollars with which the debt was paid.

    By March, inflation had touched 914 percent a year, at which rate prices would rise more than tenfold in 12 months. Experts agree that quadruple-digit inflation is now a certainty.

    In the midst of this craziness, some Harare enclaves seem paradoxically normal. North of downtown, where diplomats and aid workers are financed with American dollars, and generators and bottled water are the norm, the cafes still serve cappuccino and the markets sell plump roasting chickens, albeit $1 million chickens.

    Everywhere else, the hardship is inescapable.

    In Glen Norah, a dense suburb of thousands of tiny homes southwest of the city, 58-year-old Ayina Musoni and her divorced daughter Regai, 26, share their five-room house with Regai's two children and three lodgers. The lodgers, two security guards and a teacher, pay monthly rent totaling $3 million, or about $14.25 in American money.

    Ms. Musoni's latest monthly bill for services from the Harare city government was $2.4 million. The refrigerator in her closet-size kitchen is empty except for a few bottles of boiled water. Christmas dinner was sadza, or corn porridge, with hard-boiled eggs. For Easter, there was nothing.

    Mother and daughter make as much as $10 in American money each week by selling vegetables, from 7 a.m. to 6 p.m. daily. But the profits are being consumed by rising costs at the farmers' market where they buy stock. "Like potatoes," Regai said. "I went last week, and it was $500,000 for a packet. And when I went this weekend, it was $700,000.

    Millions of Zimbabweans survive these days on the kindness of outsiders — foreigners who donate food or medicine and, more important, family members who have fled the nation for better lives abroad.

    As many as three million Zimbabweans now live elsewhere, usually in Britain, South Africa or the United States. An economist here, John Robertson, estimates that they remit as much as $50 million a month to their families — the equivalent of one sixth of the gross domestic product.

    Ms. Musoni's is not a hard-luck story; in Harare, most people now live this way, or worse. Indeed, life for many may be better in the nation's impoverished rural areas, where subsistence farming is the only industry and millions of people are guaranteed free monthly rations from the United Nations and other donors. In the cities, little is free.

    Unity Motize, 64, lives with her 65-year-old husband, Simeon, in Highfield, a middle-class suburb turned slum not far south of town. The couple occupies one room of their three-room house. The second sleeps two sons, their wives and their two infants, all left homeless last May after riot police bulldozed the homes of hundreds of thousands of slum-dwellers. A 23-year-old son and an unemployed daughter sleep in the living room.

    Hyperinflation is a cradle-to-grave experience here. The government recently announced that the price of childbirth, now $7 million, would rise 463 percent by October. Funeral costs are to double over the same period.

    In rural areas, said one official of a foreign-based charity who declined to be named, fearing consequences from the government, even the barest funeral costs at least $6 million, or about $28.50 — well beyond most families' means. The dead are buried in open fields at night, she said. Recently, she watched one family dismantle their home's cupboard to construct a makeshift coffin.

    "I'll never forget that," she said. "The incredible sadness of it all."

    Critics say that Zimbabwe's rulers are oblivious to such suffering — last year, Mr. Mugabe completed his own 25-bedroom mansion in a gated suburb north of town, close by the mansions of top ministers and military allies.

    But the government says it has a plan to revive the economy. That plan, the latest of perhaps seven in 10 years, would quickly raise billions of American dollars to end a chronic foreign currency shortage, cut the inflation rate to double digits by year's end and an end to the recession that has gripped Zimbabwe, halving its economic output, since 1999.

    Mr. Robertson, the economist, says that is unlikely. Zimbabweans can and probably will endure greater hardship, he says. As a whole, the nation has only now sunk to standards common elsewhere in Africa. But the government may have reached the limit of its ability to do anything about it. Cutting spending seems impossible, and raising taxes further is unthinkable.

    That leaves one option: "much more inflation," he said. "Because this government is always going to be printing its way out of its current difficulty."
  2. https://www.cia.gov/cia/publications/factbook/print/zi.html

    The UK annexed Southern Rhodesia from the [British] South Africa Company in 1923. A 1961 constitution was formulated that favored whites in power. In 1965 the government unilaterally declared its independence, but the UK did not recognize the act and demanded more complete voting rights for the black African majority in the country (then called Rhodesia). UN sanctions and a guerrilla uprising finally led to free elections in 1979 and independence (as Zimbabwe) in 1980. Robert MUGABE, the nation's first prime minister, has been the country's only ruler (as president since 1987) and has dominated the country's political system since independence. His chaotic land redistribution campaign, which began in 2000, caused an exodus of white farmers, crippled the economy, and ushered in widespread shortages of basic commodities. Ignoring international condemnation, MUGABE rigged the 2002 presidential election to ensure his reelection. Opposition and labor strikes in 2003 were unsuccessful in pressuring MUGABE to retire early; security forces continued their brutal repression of regime opponents. The ruling ZANU-PF party used fraud and intimidation to win a two-thirds majority in the March 2005 parliamentary election, allowing it to amend the constitution at will and recreate the Senate, which had been abolished in the late 1980s. In April 2005, Harare embarked on Operation Restore Order, ostensibly an urban rationalization program, which resulted in the destruction of the homes or businesses of 700,000 mostly poor supporters of the opposition, according to UN estimates.
  3. http://www.newsweek.com/id/129010?GT1=43002

    Zimbabwe's new 10 million dollar bill is red. One side has the official stamps of the Reserve Bank of Zimbabwe and some meaningless serial numbers. The other is a pastiche of a fish jumping out of a lake and a giant dam in the background. The bill, released for the first time last month, is actually not a proper currency note at all but rather a "bearer check." Zimbabwe stopped printing real money long ago, when its inflation rate was still at a manageable level. Today these bearer checks are the only currency remaining. Last week in Zimbabwe 10 million dollars could buy exactly two rolls of toilet paper. By now it probably won't get quite that much.

    Such is the state of the world's most bankrupt and fiscally untenable economy. Zimbabwe's 100,000 percent inflation rate is the world's highest - a runaway train with no driver, no brakes and no limits to the train's top speed. Perhaps it's not surprising, then, that Zimbabweans have learned to cope by developing one of the world's most sophisticated black markets. If the local merchants didn't keep this economy afloat with fuel, oil, corn and the cash to fund it all, the already unstable southern African nation could slip into civil war.

    Nor is the country's March 29 presidential election likely to bring any relief from the scourge of hyperinflation. Robert Mugabe, the autocratic president whose 28-year rule is blamed for Zimbabwe's economic mess, blames the problem on the legacy of sanctions and British imperialism. None of his rivals has offered up concrete proposals to fix the problem. His main challenger, Simba Makoni, says that simply removing Mugabe will do wonders for the economy by restoring a modicum of confidence in the markets. But the fact is that no one really knows where to start. "We just don't have people here who have dealt with this kind of hyperinflation," says David Coltart, an opposition parliamentarian.

    Officially, one U.S dollar is worth about 30,000 Zimbabwean dollars. As of last week the real price on the black market was about 35 million dollars, or 1,166 times the official rate. The bill for a simple meal I shared with five other people at an unassuming cafe in Zimbabwe last week came to 581 million Zimbabwean dollars. The black market value: US$21. If I had paid according to the bank's rate? US$19,366.

    Much of the international focus on Zimbabwe has been on the land disputes between white farmers and the black pro-Mugabe "war veterans" who have occupied their properties in recent years. But a closer look at the skewed price scales offers a different insight into why the country is in such profound crisis. The average wage for a farm worker is 30 million dollars per month. A domestic worker makes about five times that amount, and a laborer in one of Zimbabwe's decrepit factories can expect to earn as much as 300 million per month. It sounds good until you consider how much things cost. Four Coca-Colas cost about 20 million. A one-way bus ticket around town will set you back one of those 10 million dollar notes (and that price may go up even as you're on the bus). Ten kilograms (22 pounds) of corn meal, which might last a family of four two or three days, goes for 45 million. It's 7 million for less than a quarter pound of low-grade beef. A loaf of bread is 10 million. If you're a government worker you'll earn a monthly pension of 60,000 (yes, thousand) a month. But an empty potato sack alone costs 2 million, or 33 times your monthly pension.

    It's no wonder the black market is thriving. At the center of it is fuel. The price of fuel can change every hour, throughout the course of a day. Last week a liter of fuel (about a quarter of a gallon) was selling for 32.5 million, the week before it was 25 million, and by next week it's estimated to be up to more than 40 million. "As fuel prices rise, everything else rises," one black marketer explained to me recently. We were sitting at his living room table, which was piled high with bundles of 10 million dollar notes, billions and billions of dollars scattered about the table like piles of napkins. On a nearby shelf more bundles were stacked. This black marketer, who wouldn't give his real name because of the nature of his work) sells up to 1,000 liters (about 250 gallons) of fuel a day. "Fuel is not static at all; it's changing on an hourly basis," he explained. "A load of transport costs 10 dollars, and fuel is eight. Say you've bought a side of beef that costs 20 million, and transport was a million, now you sell the beef for 22 million. Then the price of fuel rises, but you've already sold your beef, so it'll cost you 24 million in the end. So the price of fuel controls everything that gets sold around here." The government does import fuel, but no one would have access to it if it weren't for the black market. The bureaucracy is too complicated. "By the time you're done applying for fuel three days have gone by and you get to the garage and they haven't got it," explains the black marketer.

    Even the traders sometimes get confused. One day recently this marketer picked up his cell phone at the house that also serves as his office. "At the moment that'll be 120 million - I mean billion, billion. Let's get it straight, eh?" he said, and chuckled. Afterward he noted the transaction and grimaced. "I have to write it down, one B and 200 M's." The worst part, he says, is that now when he leaves the country he always has the feeling that his pockets are never full of enough cash. "You go to get groceries and you've only got two notes in your pocket and you get this horrible feeling: 'Am I going to have enough money?' You're used to carrying this briefcase around."

    When Godfrey, another black marketer, heard about the introduction of the 10 million dollar note last month, his first reaction was "Why only a 10 million?" The value of the 10 million note lasted only a couple of weeks. Soon enough, Zimbabweans were back to carrying wads of them, briefcases full of them, plastic bags of money. It was only two months ago that people started trading in billions, but now, says the first black marketer, "we're just about out of the billions, we're almost into the trillions."

    The result is a mafialike system whereby officialdom and the ordinary citizenry have become complicit in the same illegal trade. Around the 26th of each month, one black marketer told me, government officials from the finance ministry appear in the southern town of Bulawayo and rent rooms at the Holiday Inn. Like all governments, Zimbabwe has monthly bills to pay: electricity and fuel bills are owed to South Africa; military weaponry bills are owed to Mozambique. Because the Zimbabwean dollar isn't worth anything, the government has to pay in U.S. dollars. So the government sends "buyers" down to Bulawayo to buy foreign currency on the black market. "These guys will come down, rent a room at the Holiday Inn, and they'll have big suitcases just full of cash. It happens every month when the bills are due," another black marketer told NEWSWEEK. "The dealers come and they sell billions of dollars so the government can pay its bills on time. The black market is very clever. It's like the mafia; it's creative." (Needless to say, the government is not in the habit of commenting on these reports.)
  4. are we......US of A, really that much different in our practices in political corruption?..........aside from skin color....i think not.

    good read.
  5. http://www.mg.co.za/article/2009-08-19-zimbabwe-inflation-quickens-crisis-persists

    "Zimbabwe's inflation rose to 1% month-on-month in July from 0,6% in June

    Zimbabwe saw hyperinflation reach 231-million percent last July until the unity government formed by President Robert Mugabe and Prime Minister Morgan Tsvangirai adopted the use of multiple currencies to replace a worthless local currency.

    But although supermarket shelves, which were emptied when Mugabe ordered price cuts in 2007, have largely restocked with imported goods, most people cannot afford to buy goods because of low levels of income."
  6. Are you freaking kidding me?
  7. TGregg


    From the Wiki:

    LOL! "Yeah, we know we run your white @$$ out of the country and took your farms, then couldn't make them work. But if you come back, we promise to be nice."

    And some did come back. That's hilarious! They must have been liberals believing in the dream of racial harmony in a black run country.

    Guess what happens next? LMAO!

    If Shakespeare had written a comedy like this he would have tossed it in the fire for being just too far fetched to be believable. But here it is. OMFG people can be stoooopid.
  8. l2tradr


    Still peanuts in comparisons to the numbers in Hungary circa 1946 :)