Ndamu Sandu
8 November 2008
Harare — ZIMBABWE'S inflation last month hit the quintillion percent mark, an indication that the country's economic woes are far from over, a report by an internationally renowned economist has revealed.
Professor Steve Hanke, a senior fellow at the Cato Institute in the United States, said Zimbabwe's annual inflation had soared to 2.79 quintillion percent, a world record in many respects. A quintillion is a figure with 18 zeroes and is a rung above a quadrillion.
Hanke developed the Hanke hyperinflationary index, a metric derived from market price data, which can be used to calculate inflation in the absence of information from the government's statistical bodies, as in the case of Zimbabwe.
"Zimbabwe is the first country in the 21st century to hyper inflate," said Prof Hanke, who has played a prominent role in designing and implementing monetary reforms that have reduced high attitude inflation in eight countries.
"In February 2007, Zimbabwe's inflation rate topped 50% per month, the minimum rate required to qualify as hyperinflation (50% per month is equal to a 12 875% per year)."
Moffat Nyoni, acting director of the Central Statistical Office (CSO), refused to comment on Prof Hanke's projections saying the government body charged with collecting official statistics was still in the process of compiling data used to calculate inflation.
The last figures released by the CSO were for July, which showed that annual inflation peaked at 231 million percent, a figure widely disputed by independent economists.
Official figures for September, October and November have not been released.
Nyoni said his staff had resorted to calculating inflation manually because computers could not cope with the accumulating zeroes in the local currency.
Independent economist, John Robertson said the Cato Institute projections made a lot of sense considering the rate of price increases.
He said for example between October 2007 and last month, the exchange rate had moved up by 185 quadrillion percent.
Knocking off zeros from the dollar has not helped addressing the causes of inflation, Robertson said. In 2006, the central bank loped off three zeros from the currency and in August this year removed another 10.
"All the 10 zeros are back with us and the other five will be with us by the end of the month," Robertson said, cautioning that the CSO might come up with unreliable figures because of the manual calculations.
The main cause of hyperinflation is a rapid increase in the amount of money in circulation, which is not supported by growth in the output of goods and services.
The central bank has been accused of printing money to fund operations that should be accommodated in the national budget. But Reserve Bank of Zimbabwe governor, Dr Gideon Gono says he will not stop printing money until sanctions on Zimbabwe are removed.
Under hyperinflation conditions, governments introduce higher denominations to ease the burden on consumers carrying wads of cash.
Last week, the RBZ introduced $100 000, $500 000 and $1 million notes to deal with the widespread cash shortages.
The Zimbabwean dollar has been the biggest casualty of hyperinflation, which has seen it weakening at a rapid rate against major currencies.
From $140 to one US dollar in the week ending September 27, the battered Zimbabwe dollar had depreciated to $140 000 to one US dollar as of Thursday. This means that the Zimbabwean dollar had depreciated by nearly 100 000 percent in over a month.
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