About Zimbabwe
Zimbabwe is located in the southern region of the African continent by Zambia and to the east of Mozambique. Hyperinflation in Zimbabwe was caused by numerous economic shocks. Their money supply was increased, declines in output and exports, and political corruption. Zimbabwe’s uncontrollable and extreme inflation made it the first country in the 21st century to experience hyperinflation.
Before and Starting of Hyperinflation
At independence, the annual inflation was 5.4% month to month averaged. In 1982, the unemployment rate was 10.8 percent. In July 2008, Zimbabwe’s central office released its last inflation figures for the year. The bank announced it would print larger bills to buy foreign currencies. To finance the higher debate the government responded by printing more money which caused inflation. When white farmers were introduced to black farmers there was a large fall in food production.
The economy experienced a sharp fall in output in manufacturing and agriculture. Which caused a collapse in bank lending. Due to the decline in output, there was a shortage of goods. The combination of more money chasing fewer goods caused rapid rises in prices. But, because the cost of production increased faster than prices, suppliers had little to supply the goods. This made the shortage worse and the actual inflation worse.
During and After Hyperinflation
People couldn’t afford basic goods, no credit available, menu costs, barter economy, lost savings, damage to business confidence. People became “poverty billionaires” It was no good having a salary of One billion dollars if a loaf of bread cost two billion. Banks closed and were unwilling to lend any money and normal business activity closed down and investment was cut back. Anyone who received money had to exchange it into a foreign currency or spend it right away. With money becoming worthless, people found many ways around the economy, the problem was that the barter economy was only useful if you have goods to exchange. Anyone with savings lost everything unless they were able to exchange with foreign currency. The extent of hyperinflation and fall in output disrupted normal economic activity and saw Zimbabwe’s GDP shrink, which affected investors for a long time. Hyperinflation and economic troubles were profound that by 2008, they wiped out the wealth of citizens and sent the country back more than a half-century.
Ending of hyperinflation
The government eventually stopped printing Zimbabwe dollars and normalized the practice of using the US dollar. In 2015, Zimbabwe announced things to be switched to the United States dollar by the end of that year. According to the Reserve Bank of Zimbabwe, the October 2011 consumer price inflation was 4.2 percent on a year-over-year basis, compared with 4.3 percent in September. Transactions in hard foreign currencies were authorized. Loss of confidence quickly leads to the abandonment of the Zimbabwean dollar in favor of foreign currencies.
Social impacts
Prices doubled every day, goods and services doubled twice each day. Without the unemployment there was rate exceeding activities. It also made consumers stock up on items. It made the currency worthless.