page_title: Hyperinflation in Zimbabwe
section_title: Historical context
hierarchical_section_title: Hyperinflation in Zimbabwe / Historical context
caption_attribution_description: English: The Obverse of the 2009 Zimbabwe $100 trillion banknote.
context_page_description: Hyperinflation in Zimbabwe was a period of currency instability in Zimbabwe that, using Cagan's definition of hyperinflation, began in February 2007. During the height of inflation from 2008 to 2009, it was difficult to measure Zimbabwe's hyperinflation because the government of Zimbabwe stopped filing official inflation statistics. However, Zimbabwe's peak month of inflation is estimated at 79.6 billion percent month-on-month, 89.7 sextillion percent year-on-year in mid-November 2008.
  In April 2009, Zimbabwe stopped printing its currency, with currencies from other countries being used. In mid-2015, Zimbabwe announced plans to have completely switched to the United States dollar by the end of that year.
  In June 2019, the Zimbabwe government announced the reintroduction of the RTGS dollar, now to be known simply as the "Zimbabwe dollar", and that all foreign currency was no longer legal tender. By mid-July 2019 inflation had increased to 175%, sparking concerns that the country was entering a new period of hyperinflation. In March 2020, with inflation above 500% annually, a new taskforce was created to assess currency issues.
context_section_description: On 18 April 1980, the Republic of Zimbabwe was born from the former British colony of Southern Rhodesia. The Rhodesian Dollar was replaced by the Zimbabwean dollar at par value. When Zimbabwe gained its independence, the newly introduced Zimbabwean dollar was initially more valuable than the United States dollar at the official exchange rates.  But this did not reflect reality, as in terms of purchasing power on the open and black markets, it was less valuable, due primarily to the higher inflation in Zimbabwe. In its early years, Zimbabwe experienced strong growth and development. Wheat production for non-drought years was proportionally higher than in the past. The tobacco industry was thriving as well. Economic indicators for the country were strong.
  From 1991 to 1996, the Zimbabwean ZANU-PF government of president Robert Mugabe embarked on an Economic Structural Adjustment Programme (ESAP) that had serious negative effects on Zimbabwe's economy. In the late 1990s, the government instituted land reforms intended to evict white landowners and place their holdings in the hands of black farmers. However, many of these "farmers" had no experience or training in farming.  From 1999 to 2009, the country experienced a sharp drop in food production and in all other sectors. The banking sector also collapsed, with farmers unable to obtain loans for capital development. Food output capacity fell 45%, manufacturing output 29% in 2005, 26% in 2006 and 28% in 2007, and unemployment rose to 80%. Life expectancy dropped. The Reserve Bank of Zimbabwe blamed the hyperinflation on economic sanctions imposed by the United States of America, the IMF and the European Union. These sanctions affected the government of Zimbabwe, asset freezes and visa denials targeted at 200 specific Zimbabweans closely tied to the Mugabe regime. There were also restrictions placed on trade with Zimbabwe, by both individual businesses and the US Treasury Department's Office of Foreign Assets Control.
  A monetarist view is that a general increase in the prices of things is less a commentary on the worth of those things than on the worth of the money.  This has objective and subjective components:
  Objectively, that the money has no firm basis to give it a value.
  Subjectively, that the people holding the money lack confidence in its ability to retain its value.
  Crucial to both components is discipline over the creation of additional money.  However, the Mugabe government was printing money to finance military involvement in the Democratic Republic of the Congo and, in 2000, in the Second Congo War, including higher salaries for army and government officials. Zimbabwe was under-reporting its war spending to the International Monetary Fund by perhaps $23 million a month.
  Another motive for excessive money creation has been self-dealing. Transparency International ranks Zimbabwe's government 157th of 177 in terms of institutionalised corruption. The resulting lack of confidence in government undermines confidence in the future and faith in the currency.
  Economic mis-steps by government can create shortages and occupy people with workarounds rather than productivity. Though this harms the economy, it does not necessarily undermine the value of the currency, but may harm confidence in the future. Widespread poverty and violence, including government violence to stifle political opposition, also undermines confidence in the future. Land reform lowered agricultural output, especially in tobacco, which accounted for one-third of Zimbabwe's foreign-exchange earnings. Manufacturing and mining also declined. An objective reason was, again, that farms were put in the hands of inexperienced people; and subjectively, that the move undermined the security of property.
  Government instability and civic unrest were evident in other areas. Zimbabwean troops, trained by North Korean soldiers, conducted a massacre in the 1980s in the southern provinces of Matabeleland and Midlands, though Mugabe's government cites guerrilla attacks on civilian and state targets. Conflicts between th
caption: The largest denomination of a Zimbabwean banknote (Z$100,000,000,000,000)
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