Why Zimbabwe Collapsed

A deepening concern is increasingly settling over Zimbabwe as the country's local currency loses value at an alarming speed, prices soar, the last 3 years has seen some big local and foreign businesses close their doors, and citizens wonder whether their savings are about to be wiped out once again, as they were during the economic collapse and spectacular hyperinflation that tore through the country a decade ago. The currency is in free fall and The Reserve Bank of Zimbabwe is attempting to introduce ever-higher denomination notes; but in March this year inflation topped 400%. This could be the country’s worst economic crisis in more than a decade and rising public anger has stoked concern that the military, which ended former President Mugabe’s more than three-decades rule, might step in again.

The origins of Zimbabwe's currency crisis stretch back to a violent land-reform program initiated by the late President Robert Mugabe in 2000, that saw black Zimbabweans taking back their land from about 4,500 white commercial farmers. The forceful confiscation of the land sent farmers packing without compensation, in the wake of which food and export crop production crashed and the country’s economy went into a tailspin and devastated government finances.

Zimbabwe recorded the second highest incidence of hyperinflation in history – only second to post war Hungary. Prices began to rise exponentially and the country’s inflation rate for November 2008 was a staggering 79.6 billion percent. What did the government do.. They just kept printing. At one point, Zimbabwe had a Z$100,000,000,000,000 note - one trillion Zimbabwean dollars. The note, along with previous hyper-inflated denominations including Z$10,000,000,000,000 (ten trillion) and Z$1,000,000,000,000 (one trillion), could be exchanged for U.S. dollars until the end of April 2016, but it was worth only about $0.40. Interestingly, the notes fetch significantly higher prices on websites such as eBay where they are regarded as collectors items since they are just so incredibly rare.