Zimbabwe – redefining inflation

With the fuel prices sky rocketing and the prices of all regular commodities at their all time high’s, many people started thinking of what they have read of a long back while at school – inflation. I always thought it was some other stuff like democracy that exists only in the books, but now has proved itself not to be. The common Indian man has started facing the wrath of inflation with the rate hitting a 12 percent. Gasoline which now costs about 57 rupees a liter along side the soaring costs of liquefied petroleum played a prime role in such an uncontrollable rise. When the indian government, a collection of some of the finest economic gurus in the world like Mr Chidambaram, Dr. Manmohan Singh who successfully handled such adverse situations more than a decade ago, couldn’t stop it, think of the poor African nations which do not have a proper governance, no law, no health care system and absolute poverty. Yeah, the results are clear with a mammoth inflation rate, outbreak of famines, shortened life spans and dignified living just a dream. Imagine a place where you need to carry a billion dollars in local currency for a loaf of bread, its not a stupid fantasy, the real life situation in Zimbabwe.

Overthrowing the white Rhodesian government, Robert Mugabe more than thirty years ago paved way for the  situation in Zimbabwe now as per many economists. Despite Mugabe stepping down, what actually started during his regime did not come to a halt. The result is a claimed 2.2 million percent inflation rate by the government ( the experts say it is over a 20million percent). Imagine the plight of people living there when we are lamenting a 10 percent increase in inflation. One lesson, everyone needs to learn from the Zimbabwean situation is not to misuse or waste the cultivable land and resources. The produce of every good is in a deficit, but it makes no difference as the people are not in a situation to buy them. Every shop is filled with commodities, but no one to actually buy them. With the value of a Zimbabwean dollar as per estimates, decreasing at over a 5 percent every day, people find it wise to invest in some food rather than in banks which offer a 5-10 percent annual rate of interest. The central bank has issued a $50bn note to ease the woes of its people who were forced to carry leaps of notes for everything. The value of the Zimbabwean dollar has gone down to a level that about a $100bn equals a 36 pence (0.36 British pound).

Exchange of foreign currency in the country is also limited to a few higher officials at about $30000 per USD. Parallel exchange rate stands at more than a $270bn as per the Guardian report.

Click the link below for more on the issue

The Guardian – an article on Zimbabwean inflation