Mugabe Considers Revival Of "Hyperinflated" Zimbabwe Dollar

Tyler Durden's picture

It seems every bubble is coming back. 5 Years after Zimbabwe abandoned the Zim Dollar (in favor of the US Dollar) after inflation surged to 500 billion percent the year before (according to the IMF), Bloomberg reports that Robert Mugabe's ruling party is considering reintroducing the local currency as it struggles to meet its monthly wage bill. "If they bring back the [Zim] dollar it will quickly deteriorate to worse than then, we’ll have nothing," warns one businessman as the appeal of reviving the Zimbabwe Dollar - allowing the government to print money to meet its needs - is surely outweighed by the lessons of the past. "We'll just die - we can't go back to 2008," but it seems governments never learn and memories are short. Get long wheel-barrows.

 

 

As Bloomberg reports, Zimbabwe is weighing the reintroduction of the national currency it abandoned in 2009 in favor of the U.S. dollar as it struggles to meet its monthly wage bill, three members of the ruling party’s decision-making body said.

While the revival of the Zimbabwe dollar would allow the government to print money to meet its needs it could damage the popularity of President Robert Mugabe’s Zimbabwe African National Union-Patriotic Front, said the people, who asked not be identified because the discussions are private. Patrick Chinamasa, the country’s finance minister, didn’t answer calls made to his mobile phone.

 

Zimbabwe abolished its national currency in 2009 after inflation surged to 500 billion percent the year earlier, according to International Monetary Fund estimates, and the party lost its parliamentary majority in elections while retaining the presidency.

 

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The party’s politburo is trying to decide whether it will do more harm to its image by reintroducing the currency and meeting its wage commitments or continuing to use foreign exchange, protecting the country’s citizens against inflation, the people said. A majority of politburo members are currently against its reintroduction, they said.

 

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"We’ll just die, we can’t go back to 2008,” said Jehosephat Dambadza, a furniture-maker in Harare, the capital, said in a telephone interview. “If they bring back the dollar it will quickly deteriorate to worse than then, we’ll have nothing.”

 

This year the economy has slowed with sales of consumer goods falling as much as 30 percent in February and revenue collection declining by a 10th, according to the Treasury. Consumer prices fell for a second month in March, while wages accounted for 58 percent of government expenditure in February. Pay increases agreed to by the government earlier this year were delayed.

 

Together with soldiers and police Zimbabwe has about 285,000 government workers.

 

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“Zimbabwe has big economic problems. They have a huge current account-deficit and a fiscal shortfall,” Viljoen said. “They need money from somewhere and they’re running out of options. Reintroducing the Zimbabwe dollar could be an option.”

Is that really an option? It seems governments never learn or care to learn...