Something extraordinary is happening in Zimbabwe. Supermarket shelves that were empty three months ago are once more stacked with produce. Prices, practically doubling daily at one stage, have been going down. The simple explanation for this apparent miracle in Zimbabwes broken-down economy is that everything is now priced in US dollars or rands.
Zimbabwes dollar, shrinking at a dizzying rate despite repeated efforts to relaunch it, has disappeared into nothingness, devoid of value except as a souvenir.
In late January, the Reserve Bank of Zimbabwe gave up trying to stem dollarisation of the economy, and let all companies and individuals conduct transactions in foreign currencies.
Until then, only authorised businesses were allowed to do so. But retailers and service providers were increasingly demanding payment in US dollars or dollar-based fuel coupons.
Then, in a bid to keep the countrys currency alive, the bank announced further re-denomination of Zimbabwes dollar: one new unit for every trillion old units.
Bank governor Gideon Gono was adamant that other currencies would never overtake the Zimbabwean dollar, and it would remain a fundamental economic pillar of our sovereignty.
More importantly, perhaps, was that he could print Zimbabwean dollars at will, and allocate them. His post, now at the centre of a political battle, became the most powerful in the countrys distressed economy. But those Zimbabwean dollars have rapidly become irrelevant.
There have been cases before of a country throwing over its own currency and adopting someone elses. Panama, Ecuador and El Salvador, for instance, all use the US dollar. But Zimbabwe is unusual in allowing not one but several foreign currencies.
The rand, popular in Bulawayo, is also used in Harare for small change. Otherwise, the lowest US denomination available is the one dollar note.
Inflation in Zimbabwean dollar terms reached an annual rate of 231-million percent last July when the authorities stopped counting and galloped on well into sextillions.
Three months ago, shelves were almost empty. Shopkeepers removed goods because they could not make a profit at government-controlled prices, and wholesale suppliers withheld deliveries as they were no longer willing to be paid in money that was plummeting in value by the hour.
David White, Zimbabwe open for shopping,
Business Day, March 13, 2009.
For text: http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A958584
FMF Policy Bulletin/ 17 March 2009