The Return of the Zimbabwe Dollar – Part 1 – History

The Return of the Zimbabwe Dollar – Part 1 – History

The Zimbabwe dollar is currently in a state of suspended animation created by the then Finance Minister, Tendai Biti  in an effort to reign-in inflation that was running at over 79,600,000,000.00% in its final months (14/11/2008). Like an abused and vicious dog that has been chained up, the prospect of letting the Zim-dollar loose on the financial markets is a daunting if not impossible task.

In this set of papers we are examining a possible plan, that could, with the right political motivation, testicular fortitude and nationalist support from the citizens of Zimbabwe inside and outside the country, have half a chance of success. Like all the ideas here at ThinkZim we are not saying that our view is the be all and end all. Others may find merit and perhaps even be able to refine the idea, furthermore  others may challenge our views but what is important is that we get the conversation going.

In order to move forward with the idea we wish to expound upon, one has to consider how the Zim-dollar wound up being a literal car crash of a currency. The causality table below gives a brief timeline of how disaster came about:


Nov 1997ZANU in a knee jerk reaction orders Government to pay veterans of the Liberation War Z$3,5 billion in reparations (about US$1 billion) which was not budgeted. The War vets compensation triggers Black Friday”, when Zim-dollar plunges a record 72%
1998Zimbabwe enters the 2nd Congo War on the side of Laurent Kabila, without a plan or a budget at the cost of $1, 5 million a day and over the next three years spent another $1,5 billion on the war
2000 - 2007 (ongoing)Land expropriation program of 4500 farm, decimated grain, beef, dairy, flower production. Also significantly reduced foreign investment confidence resulted in shares being dumped on the Zimbabwe Stock Exchange

In 2016 the appropriation of property is still ongoing. For more info click here
2003Liquidity crunch and bank closures,
Jan 2005 - May 2007 Printing money to stave of disaster - Gono-nomics (irony following the credit crunch several governments which had denounced Gono, borrowed elements of these policies, but they now call it Quantitative Easing)
Apr 1 20062nd Zim-dollar
Aug 1 20083rd Zim-dollar, the bearer cheques (The forerunner of the Bond Notes)
Feb 2009Short-Term Economic Recovery Program (STERP), the government consented to transactions in foreign currency and to the full dollarization of Zimbabwe, as a way of controlling inflation.
April 12, 2009Zimbabwe dollar suspended as legal tender
March 2015 Cash US dollar shortages start to become apparent and economy starts to overheat again.


So how is the Zimbabwean Economy Constituted…

Zimbabwe’s economy is made up of 3 foundation pillars which are supported by, and contribute to, the service and manufacturing sectors. All of this is supposed to be promoted and supported by the governments policies, attitudes and parastatals. The diagram below illustrates the point being made at a very high level:

Zimbabwe Economy - THE PILLARS - CurrentRobust as this setup appears it has weaknesses, as events over the past decade and half have illustrated. For example, there are the strong sympathetic and symbiotic relationships between all the sectors, and the government of Zimbabwe, ignored these links and the results are plain for all to see. The destabilisation of the agricultural sector has had wide and far-reaching implications (some of which could be classed as extinction level events) which could have been mitigated against if more fore-thought had been put into the land redistribution programme.

Indeed these relationships should have been strengths but the nature of the attacks on the economy made the relationships a liability.

16 years later and a lot of those same farms are either silent or production is a shadow of what it was previously. Immediate effects have been, loss of commercial revenues and forex inflows, increases in unemployment and disruption of the society in the farming areas and support industries. Investor confidence in the Zimbabwe governments ability to “do the right thing” was also shattered and fell even further as foreign and local investors either adopted a “wait and see attitude” or decamped to “safer” economies.

Due to the violent nature of some of the farm takeovers, anti-western rhetoric from the government and all round negative press, tourist receipts also significantly declined. Damage to both these sectors in turn decimated both the manufacturing and service sectors. The result, more unemployment and GDP falls off a cliff. Add to this deadly mix the somewhat ham-fisted, piece-meal and confused recycling of  economic stratagems seemingly without taking cognizance of the new realities that now permeated the new dysfunctional  Zimbabwean economy .

In other words there is a repeated consistent failure by those in a position to do so, to acknowledge that the Zimbabwean economy is a living organism and a failure of an economic pillar is akin to major organ failure in the human body. Only bad things can happen after that,without a well thought out triage plan….

But there may be a way to get out of this very deep hole. However for that to happen there has to confidence in the executors of the idea and a solid forward looking plan that mitigates against the known and unknown risks within the existing economic ecosystem.

See our next episode on what the idea is…

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