A country of trillionaires
S. Madhusudhana Rao
Thirty-five trillion is the amount of money you will get for one US dollar if you are in Zimbabwe! Am I kidding? No. That’s true — and official. Unless you have other intentions of putting the devalued money to better use, you don’t venture to buy billions of paper money. On the other hand, Zimbabweans have started rushing to the nearest bank to exchange trillions of their old Zimbabwe dollars for a few American dollars following demonetization.
The southern African country where President Robert Mugabe has been in power for 27 years has the dubious distinction of turning his people not millionaires and billionaires but trillionaires — an achievement no other world leader could claim.
How he has succeeded in accelerating the hyperinflation from a single digit to the highest possible percentage point is mindboggling. Possibly, even the Nobel Laureates in economics can’t explain the African leader’s fiscal management in the resource-rich country. In fact, the value of local currency Zimbabwe dollar (Z$) has been plunging like water at the country’s best tourist attraction Victoria Falls since the 80s.
According to the data provided in Wikipedia, Zimbabwe (formerly Rhodesia under white rule) inflation rate at the time of independence in 1980 was 7 percent. A year later, it doubled and the two-digit norm had continued until 2000 when the inflation touched about 55 per cent. Then onwards, it has run in astronomical proportions. In mid-November 2008, the hyperinflation rate had spiraled so much that it was put at 79,600,000,000 per cent! It was a situation where zero was really a zero and did not add any value to any number. By the end of that year, the inflation was at an all-time high of 500 billion per cent. A world record. After that, presumably, Zimbabweans and economic experts around the globe had stopped counting zeroes in the inflation percentage.
Mugabe seemed to have believed that printing more paper money was the cure for all economic ills of his country without realizing the fact that his populist measure — putting as much money as possible in people’s hands — would set off a chain reaction in runaway inflation.
Its fallout was Zimbabwe turned into a nation of millionaires, billionaires and trillionaires — with zero purchasing power of local currency. It was only paper money, without security features, that was not worth the paper it was printed on. Coins, of course, disappeared in the pockets of collectors or individuals as prized possessions. One had to carry sackfuls of money to buy a bus ticket or a loaf of bread and an equal amount could not give him the same purchasing power a few hours later.
However, what was seen as giving relief to the ‘money-burdened’ Zimbabweans, the Mugabe government had started printing million, billion and trillion dollar currency notes. It did not matter for the country’s apex bank to add a few more zeroes to a single digit and print higher denomination currency notes in different colours for easy identification. The highest value currency note printed in Zimbabwe was Z$100 trillion.
We don’t know how many in a country of about 15 million people have these highest denomination notes in the world. But, by any reckoning, the notional trillionaires are no more than paupers since a Z$ trillion is worth US$ 5 that can fetch its owner just two loaves of bread.
Despite Zimbabwe’s inflation making news and creating ripples of laughter across the world, what’s shockingly strange is the huffy Mugabe has never thought of demonetizing the currency for reasons best to known to him and his coterie of advisors.
Now, under pressure from international monetary agencies and with the financial system and economy on the brink of collapse, the country’s central bank has finally decided to bite the silver bullet to ‘save’ the country. Under the demonetization exercise that began on Monday (June 15) and will continue until the end of September, people with zero balances to Z$ 175 quadrillion in banks will get US$ 5 each. Those with balances above Z$ 175 quadrillion will be paid one American dollar for 35 quadrillion Zimbabwean dollars. Those who have stashed old local currency notes can also exchange them for US dollars at the rate of one US$ to Z$250 trillion. The government has pegged the payout budget at US$20 million. That means, by September-end, trillions will vanish into a few US dollars.
Ironically, Zimbabwe’s effort to even the sinking ship has triggered a race for mopping up old currency notes by money dealers and brokers around the world. For example, eBay India is offering high denomination notes through its network in the country. The prices quoted on Monday were: Rs549 for a Z$20 trillion note; Rs169 for a Z$200 million bill; Rs199 for a Z$ 10 trillion note, and so on. A set of 4 notes in the denomination of 10, 20, 50 and 100 trillion (the highest value bill ever printed in the world) could be bought for Rs3199. Surprisingly, these worthless currencies are more valuable now – and in the coming days – than when they were in circulation. Any takers?