Zimbabwe’s Dollar Woes

May 26, 2012 in Daily Bulletin

From the days of hyperinflation that saw the distribution of 100 trillion dollar bills that weren’t enough to buy a loaf of bread, Zimbabwe has come a long way. Crucial to its economic recovery was its decision to peg its currency to the US dollar. However this has led to its own problems writes Lydia Polgreen:

  • In Zimbabwe $1 goes a really long way, and most purchases require change in nickels, dimes, quarters, and pennies.
  • However while it’s relatively easy to ship US dollar bills across from the United States, it’s too difficult to send over coins which are heavy.
  • Other countries deal with this by minting their own coins and promising that their coins are worth the same value in the pegged currency. However after Zimbabwe’s experience with hyper-inflation during which the life-savings of many people were wiped out, nobody trusts money issued by Zimbabwe’s government.
  • Some have resorted to using South African coins but even those are in short supply and the fact that its value fluctuates relative to the US dollar makes it difficult to determine how much each South African coin is worth in US currency.
  • A barter economy of sorts has risen where cashiers sell thing such as 5 cent aspirins to make up full dollar amounts so that coins don’t have to be given out.

To read other creative ways that people have dealt with the problem, as well as why $2 bills are popular, why some $1 bills have turned black, what the American Federal Reserve has to say about the problem, why Zimbabweans approach the problem with humour, and the examples of various people affected by the problem click here.

Source: New York Times

Via: Marginal Revolution