Zimbabweans will start exchanging “quadrillions” of local dollars for a few US dollars next week as President Robert Mugabe’s government discards its virtually worthless national currency.
The southern African country started using foreign currencies including the US dollar and South African rand in 2009 after the Zimbabwean dollar was ruined by hyperinflation, which hit 500bn% in 2008.
At the height of the country’s economic crisis, Zimbabweans had to carry plastic bags bulging with banknotes to buy basic goods. Prices were rising at least twice a day.
From Monday, customers who held Zimbabwean dollar accounts before March 2009 can approach their banks to convert their balance into US dollars, the governor of the Reserve Bank of Zimbabwe, John Mangudya, said.
Zimbabweans have until September to turn in their old banknotes, which some people sell as souvenirs to tourists.
Bank accounts with balances of up to 175 quadrillion Zimbabwean dollars will be paid $5. Those with balances above 175 quadrillion dollars will be paid at an exchange rate of $1 for 35 quadrillion, or 35,000,000,000,000,000, Zimbabwean dollars.
The highest – and last – banknote to be printed by the bank in 2008 was 100tn Zimbabwean dollars. It was not enough to ride a public bus to work for a week.
The bank said customers who still had stashes of old Zimbabwean notes could walk into any bank and get $1 for every 250tn they hold. That means a holder of a 100tn banknote will get 40 cents.
The bank has set aside $20m to pay Zimbabwean dollar currency holders.
Hyperinflation in Zimbabwe left pensions, wages and investments worthless and spread poverty as everyday items became unaffordable. It also caused severe cash shortages, because the government could not afford to print bank notes to keep pace with inflation.
The crisis in Zimbabwe was reminiscent of the hyperinflation Germany went through in the 1920s when the highest denomination note was 100,000,000,000,000 (100 trillion) marks and people were being paid several times a day.
Zimbabwe’s period of soaring prices came to an end in 2009 and the economy stabilised under a unity government that lasted until 2013, when Mugabe was declared the winner of Zimbabwe’s presidential election. GDP growth averaged more than 10% during 2009-2012. But the economy slowed last year and the outlook remains tough, say economists.
The International Monetary Fund’s latest overview of Zimbabwe in April said growth was expected to weaken further in 2015. “Despite the favourable impact of lower oil prices, the external position remains precarious and the country is in debt distress,” the IMF said.