Hyperinflation in Zimbabwe Essay Example | Topics and Well Written Essays - 1250 words

Hyperinflation in Zimbabwe - Essay ExampleTwo major events precipitated inflation in Zimbabwe and that is, link in Congo civil war in 1998 and the land expropriation of 2000. The Zimbabwe government entered into war on the side of Zaires dictator Laurent Kabila without having budgeted for the war, without any militia for the war or any arrangements to raise the funds. The land expropriation program of 2000 saw the government forceful take 4,500 farms from white settlers and give it to war veterans and politicians (Coomer and Gstraunthaler 312). This conduct to simplification in foreign investment from 400 million US dollars in 1998 to a mere 30 million in 2007. The productivity of the land was too reduced by half between 2000 and 2007. This government policies also led to imposition of sanctions by the IMF, US, UK and EU. The government in order to win public combine provided initiatives such as purchase of farm inputs for the farmers who had been given land. The farmers also u sed the land as securities for securing loans. This unforeseen pulmonary tuberculosis compounded with the four year expenditure in Congo war led the Reserve bank of Zimbabwe to adopt inflationary policies such as printing more money and employing more staff. This led to devaluation of the Zimbabwean dollar and the central bank responded by printing more money and even increasing the face value. This is the origin of hyperinflation in Zimbabwe. By prove 2007 the inflation rate in Zimbabwe was 2,200% while by October 2008 it rose to 3,840,000,000,000,000,000% (Noko 347).Hyperinflation led to lose of value of the Zimbabwe dollar. Wealth was lost within months as millionaires were no bimestrial wealthy. The prices of commodities went up leading the government to regulate the same. (Federal Reserve Bank of Dallas 11). This led producers to opt for other markets which led to an acute shortage of various products. The industries were dissolved, unemployment was at the highest level, de stitution rev upd and some citizens fled to other countries. The next section gives methods through which this hyperinflation could be solved. Solutions to Zimbabwes Hyperinflation Hyperinflation was brought about by the practices of Reserve Bank of Zimbabwe. Replacing the Reserve Bank of Zimbabwe is a sure way of ending hyperinflation (Hanke1 23). Some countries such as Angola have contained their high inflation rates without replacing their central bank through switch of policy. The question is why could this be implemented in Zimbabwe? This could not be adopted in Zimbabwe because from historical perspective policy change has never analyze inflation in Zimbabwe. Moreover, all over the world hyperinflation has been linked to the issue of currency by the central bank or the concerned countrys treasury. Central banks can easily end inflation as they fuel them. One of the sure ways is to stop the printing of currency. This solution reduces money in circulation and contains hyperin flation, but it is a long process because it takes time for the central bank to regain its lost credibility. During this time interest rates on loans normally escalate and it is very difficult to get a long term loan because there is less money in circula