Zimbabwe bans foreign currency, reigniting fears of hyperinflation
In November 2008 Zimbabwe’s inflation rate hit 89.7 sextillion percent (897 000 000 000 000 000 000 000%).
The Government there printed Zim dollars (aka “quantitative easing”) until they were worth nothing.
In 2009, Zimbabwe pulled the Zim dollar, thereby ending hyperinflation.
Last month the Zimbabwean government introduced the RTGS dollar, still known as the “Zimbabwe dollar”.
Kasumba discussed the banning of foreign currency in Zimbabwe to stop the illegal money trade the government blames for rising inflation.
Until it introduces a new, permanent currency, the RTGS dollar remains the only legal tender.
Some manufacturers struggled using multiple foreign currencies, which were in extremely short supply.
Workers started demanding payment in hard currency as landlords and retailers were accepting only US dollars.
Zimbabweans can possess foreign currency, but they may not use it.
When considering other similar examples around the world; it takes on average 30 years after de-dollarisation for trust in local currency to return.
An argument for currency sovereignty is that a reserve bank can’t control forex (e.g. it can’t print foreign currency or set its interest rates).
Union leaders have threatened the government with mass action if they don’t reverse the ban and start paying workers in US dollars.
For more detail, listen to the interview in the audio below.
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