“Starting from today i.e. 15th June, 2015, Zimbabwe will phase out its official currency Zimbabwean Dollar and adopt US Dollar as its official currency”
This may be shocking news to some because a country is completely doing away with its own currency but actually, this is rather a late move by Zimbabwe as this country has been facing hyperinflation for the past few years. Hyperinflation is not just a theoretical concept, in the last century, it has two such instances had been observed. They are:
- Germany in the 1920s
- Hungary post WWII
Both of them were consequences of World Wars but such was not the case with Zimbabwe. In Zimbabwe, the main reason was an ineffective monetary policy managed by the ruling government rather than its Central Bank.
Reckless printing of currency notes was done, while ignoring the quantity, cost and time constraints. The heights of printing were reached when they even issued notes of $100 trillion. This reduced the status of the currency to just that of token with not much buying power and thus this currency was ruined by 2009.
Since then, US Dollar has already been in use for day to day transactions. The Zimbabwean currency has been left as a memory or in old bank accounts. This move of completely phasing out this currency is just an attempt to clean up the banking system.
As a result of this move, Zimbabwe will lose its rights to control its own monetary policy but this also has been seen as a welcome move by some economists, hoping that this would improve the situation.
To know more, please read the following article by Tim Worstall, Author of the book, “The No Breakfast Fallacy, why the Club of Rome was wrong about us running out of resources”, at Forbes:
