Facts: Zimbabwe
Zimbabwe is a country with approximately 15 million inhabitants in southern Africa. After gaining independence from Britain, it was ruled from 1980 until 2017 by Robert Mugabe. He was initially a celebrated freedom hero, but transformed over the years into a ruthless and powerful leader.
The country’s currency, the Zimbabwe dollar, followed the economy into the abyss. Record inflation ravaged the country for large parts of the 2000s and 2010s. Banknotes of up to 100 trillion (100,000,000,000,000) dollars were printed.
Eventually, the Zimbabwean dollar was abolished, and foreign currencies were used instead. As of 2019, however, the state has opted for a new domestic currency, known as zim dollars or “zollars”.
The elderly Mugabe was forced from power in 2017. His former vice president Emmerson Mnangagwa has been president since then. Next year, general elections will be held again.
We in the West worry about inflation, yet have numbers that Zimbabwe can only dream of. In June, price increases in the African country were measured at 191 percent, in July they rose to 257 percent.
This means that the nightmare of hyperinflation, when the money almost becomes worthless while you hold it, appears to be back. 15 years ago, the government in Harare set a dismal world record, but inflation figures of several billion percent.
— Such high inflation can only mean one thing: there is too much money that has been printed, chasing too few goods and services, says Peter Stein, economist specializing in countries south of the Sahara.
Gold price guaranteed
As elections are expected next year, the government is holding back on painful economic measures against the price increases. Instead, the gold coins were launched during the summer, which weigh one ounce (about 28 grams) and are thus worth approximately SEK 18,000 each. The international gold price must guarantee the value of the coins.
“What is hoped for is that people will demand such gold coins instead of wanting US dollars as before,” says Stein to TT.
The idea is that currency flight from the country’s own zim dollar would then decrease and the situation calm down. But Stein calls it “an indirect method” against inflation, since the zim dollar is not formally pegged to gold. This is a decisive difference compared to the so-called gold standard of old, when countries undertook not to print more money than they had in gold reserves.
— It is a monetary policy experiment in the higher school. We are on uncertain ground, says Peter Stein.
Jeffrey (obscured left) and Christwish Carlos fetch water in their residential area on the outskirts of Harare. Smaller coins
However, he is skeptical for several reasons. For one thing, competition with the US dollar will be difficult.
— It is liquid, it is credible, it is easy to stock.
Firstly, SEK 18,000 is a lot of money, an amount far beyond the reach of almost all Zimbabweans. Thus, it will be at least until later this autumn before the gold coins even come close to ordinary people. In November, smaller gold coins of 1/2, 1/4 and 1/10 ounce will be released, reports the news agency AP.
Tracy, daughter of Jeffrey and Christwish Carlos, does homework at home on the outskirts of Harare. Ordinary lamps are not reliable due to frequent power outages, so the family spends precious pennies on candles. Like a monthly salary
But even the smallest of these coins will therefore be worth SEK 1,800. That corresponds to an ordinary monthly salary in Zimbabwe.
— Where would I get money for such coins? asks Harare resident Jeffrey Carlos.
“That’s how it is for the others, the rich,” he says to AP’s envoy in the capital.
His wife Christwish tells us that inflation has made even previous basic goods unattainable.
— The last time we had margarine on our bread was at Christmas. Now we see such things in the store, but they must remain there.