If you are wondering whether it is possible for a currency to be devastatingly valueless even in its very own country, then the answer is yes, possible. Meet the official currency of Zimbabwe, Zimbabwe Dollar, a currency so controversial that it becomes valueless as the time goes by.
The Zimbabwean dollar has grown to be a currency its very own people hate. Therefore, to begin the discourse about the currency, we need to take a look at the historical and political bases of the country.
It was 1980 when Zimbabwe officially declared its independence. Starting as a novel country, Zimbabwe was prosperous.
However, Dictator Robert Mugabe, former Zimbabwean prime minister, and president failed to, at least, maintain the prosperity of its people. His administration’s policies believably led the country to its own calamity for years.
Also Read: What You Need to Know About the Canadian Dollar
Hyperinflation
Speaking of Zimbabwe, the country is notorious for its hyperinflation. While the country never published its official hyperinflation, but data disclosed that the hyperinflation reached 500-billion% in 2008.
Since then, the country never published another report regarding its inflation. However, recently, the country promised to divulge its further data in February 2020.
Meanwhile, according to basic economics, the way combat inflation is to stop printing money so that the exchange rate may increase. What Mugabe administration did, however, contradicts the very basic way to combat it.
Instead, the government was printing more and more money and, subsequently, adding the ‘zero’ to meet the higher demand of value. Arguably, the government was trying to supply more bond notes as the people require more.
In contrast, it decreases the value of its own currency, making huge number of money useless. Even worse, even giving money to beggars would not do any good more money is arguably valueless.
Cost
The production cost escalates as money becomes more valueless. Ironically, the cost to produce a bond note is even bigger than its value. It is slowly killing the economy of the country itself.
While the hyperinflation and the production cost heavily contribute to the devaluation, it also affects the business and economic sectors. For example, since the costs to mass-produce products are too high, companies prefer to import almost every single product.
This leads to a surge of price. For instance, the price of bread gains 60% in the recent report. Also, the cost for a doctor consultation is more costly than the monthly wage of a nurse or a teacher.
Currency Replacement
Zimbabwe once put the United States dollar as an alternative to its currency. Instead of the Zimbabwe dollar, the country issued wages and retirement wages in US dollars.
The public perceived this as a better attempt. Considering the public’s opinion, this indicates that the Zimbabweans had little to no confidence in its very own currency.
However, this early 2019, the government started to ban foreign currencies, US dollars included. Many protests happen following this ‘East’ policies from the government. Furthermore, the government also plans to re-legalize Zimdollar again in the upcoming November.
Another attempt by the reserve bank of Zimbabwe to combat the crisis is by utilizing e-money. They use e-money since it is expensive to print physical notes. Thus, e-money has become a good, if not the best, option for Zimbabweans to do a transaction.
Cashless Society
According to the foregoing, the government has started to utilize cashless payment. Zimbabwe is considered as a successful country to implement e-money. Since there are around 60% of people use cashless payment.
However, in June 2019, following the forex ban in Zimbabwe, the price of Bitcoin rose by 1000%. That sparks anxiety among the people. Many Zimbabweans rely on cryptocurrency much for the inflation rate still hit 175% by June 2019.