30% of foreign exchange earnings to govt. official at an artificial exchange rate (2005)
iron, nickel, platinum, coal, chrome, asbestos, diamonds, tantalite, coalbed methane, and gold.Zimbabwe has more than 6,000 recordeddeposits and the capacity to produce at least25 tons of gold annually.In 2006, for example, coal productiondropped to its lowest level since 1946
Annual foreign earnings from tourism were less than one-tenth of what they were decade ago
n economics, hyperinflation is inflation that is very high or "out of control", a condition in which prices increase rapidly as a currency loses its value.Definitions used by the media vary from a cumulative inflation rate over three years approaching 100% to "inflation exceeding 50% a month."  In informal usage the term is often applied to much lower rates. As a rule of thumb, normal inflation is reported per year, but hyperinflation is often reported for much shorter intervals, often per month.
The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power.Her forign currency used is south african rand and now even the local shopkeepers have stopped accteptingzimbabwe dollar. The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that foreign currency.
Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short.
Interest rates, wages and prices are linked to a price index
the cumulative inflation rate over three years approaches, or exceeds, 100%.
Whenever money supply is increased (without a corresponding increase in the overall economy), the currency is debased. In other words, it loses value. So the cost of goods rise to counter this loss of value. If the supply of money increases above the inflation rate, the rate of inflation increases too.Zimbabwe has been printing trillions of additional Zim dollars at a time when their economy has actually been contracting (quite rapidly). The punitive regulatory measures that Mugabe has imposed on traders (ordering that they fix their prices) has served only to increase the rate at which Zimbabwe’s economy contracts. So you have an ever increasing amount of currency chasing an ever shrinking amount of goods.
In February 2007, the central bank of Zimbabwe declared inflation "illegal", outlawing any raise in prices on certain commodities between March 1 and June 30, 2007. Officials arrested executives of some Zimbabwean companies for increasing prices on their products. Such measures, frequently tried during other episodes of hyperinflation, have always failed.six-month freeze on wages on September 1, 2007
Printing more and higher denomination currency and therefore zwd loosing its value
they linked their currency to a stable foreign currency (in their case, the United States dollar)they froze government spendingthey stopped printing currencythey lifted all price controlsthey deregulated their economy
RBZ’s money machine is the main source of hyperinflation.RBZ has no ability to resist the Government’s demand for cash.RBZ finances the Government expenditure by simply printing money.
To restore stability and growth the monetary system has to replaced. The three ways are: Dollarization Currency BoardFree Banking
When the natives uses any foreign currency extensively alongside or instead their own currency/// legal tender???offered payment that by law cannot be refused in the settlement of the debt…..Unofficial Dollarization Semi Official DollaizationOfficial Dollarization when foreign currency has a full status of legal tender
An officially dollarized country imports the monetary policy of the country whose currency they have chosen. E.g. Panama and U.S.Due to the arbitrage the prices of goods are in a narrow range.Interest rates, Inflation etc are similar to that of the selected country. Examples: Ecuador, El Salvador, Panama etc.
US DOLLARS ($)Fully ConvertibleInflation and Real Interest rates are low and stable.EURO (€)High credibilityFull convertibilityLow interest rates and inflation.Most of the African countries do business more with Europe than with US.
randsSouth Africa is the largest trading partner of Zimbabwe.Many expatriates are already living in S.A.Unlike US $ and Euro it has exchange controls.(exc. Control provide greater stabilitybcoz it limits the volatility due to currency in/out flow)There can be an unified currency zone which includes S.A., Namibia, Lesotho, Swaziland
Advantages: CB are successful in promoting fiscal discipline, low inflation , economic growth and financial integration.CHARACTERISTICS:No active role in determining the monetary base.Money Supply is controlled by the market forces.Not allowed to influence the money supply e.g. cannot impose CRR etc on commercial banks.Lack of dominance of Government as they are situated in other country
The Zimbabwean Dollar is fully backed by a foreign reserve currency and is fully convertible at a fixed rate of demand.To maintain the elasticity in money supply they acquire reserves.Successful examples: Argentina(1991-2002), Estonia(1992) and Lithonia(1994).
FREE BANKING SYSTEM (a system where issue of notes etc are )No Central BankNo lender of last resortNo reserve requirementsNo restrictions on bank portfolio’s interest rate or branch banking