Hyper-inflation, the second coming?

Inflation is defined as too much money chasing too few goods, simple enough right? In recent history Zimbabwe became the textbook case of hyper-inflation in the modern era and just as Venezuela was about to take over this mantle, Africa’s “most educated” country is again in the headlines for all the wrong economic reasons.

In late 2008 Zimbabwe’s inflation peaked in November 2008 before the government stopped releasing figures and subsequently  adopted a multi-currency system of the Zimbabwe dollar in early 2009. Fast forward to September 2017, Zimbabwe has effectively run out of foreign currency to support the multi-currency system and for the last two years the Reserve Bank of Zimbabwe (RBZ) has been trying to convince citizens to use bond coins and notes at an equivalent rate as the United States dollar with waning success and growing resentment. As a black market for US dollars and a parallel pricing structure have emerged, people have started to ring the alarm bells fearing hyper-inflation has returned. While this may not be the case, the consequences of the current situation are possibly far worse than what we saw in 2008.

Yes, Zimbabwe is in the grips of inflation, however, the primary good in increasingly short supply at this stage is the US dollar. The bad news is this is having a rapid knock-on effect with the latest sector to experience shortages being fuel as there is simply no money to import it. Medicines are already in short supply in hospitals with reports of the lack of basics such as headache tablets and water.

Whereas the previous hyper-inflation cycle took eleven years to peak, this one will be much faster and vicious. It seems the government is aware of this and as usual, has chosen to go after those alerting the nation to the problems instead if fixing them. Just as citizens are all too aware of the indicators of the return of critical shortages, so too is the government. Expect more such arrests and shutting down of any spaces that allow people to lament the state of the country. Expect a raft of legislation designed to stop you finding alternatives to the shortages, including but not limited to:

  • even tighter restrictions on access to money,
  • the private importation of goods,
  • restrictions on access to information and alternative points of view through social media targeting and possibly blackouts.

Also expect conditions to get much worse much quicker, at the current rate Christmas 2017 will be a grim time indeed. With elections in 2018 and the opposition still not able to muster a real challenge, the ruling party has no incentive to act in the interests of Zimbabweans and is more interested in internal succession politics, the real question is, once the next leader of ZANU PF emerges, will they have done so decisively enough to focus on economic recovery in a post-Mugabe era? As has been said by others before, you can’t rig the economy, so despite all the political maneuvering, Zimbabwe’s economic problems and their consequences, may yet still influence the outcome of the elections long before people go to the ballot box.

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