The document discusses hyperinflation in Zimbabwe, detailing its causes, the current inflation situation, and potential solutions. Major contributing factors include controversial land reforms, drought, and HIV/AIDS, leading to severe economic challenges and rampant inflation rates. Proposed solutions include dollarization, freezing government spending, and halting currency printing to stabilize the economy.

1. Hyperinflation in Zimbabwe
Its causes, current situation and possible solutions

2. Presented By
Name Batch Number Roll
Number
Slides
Md. Golam Moula Mehedi Hasan 45E ZR – 14 1 - 7
Kazi Md. Masum 45E ZR – 04 8 - 15
Muhammad Maqsud Hussain 45E ZR – 13 16 - 22
Fardin Humayun 45E ZR – 25 23 - 31
Dipankar Ghosh 45E ZR – 36 36 - 38
Hasnat Imtiaz Uddin Ahmed 45E ZR – 56 33 - 35

3. Contents
1. About Zimbabwe
2. What is Inflation?
3. How is it Measured?
4. What is Hyperinflation?
5. Current situation in Zimbabwe
6. What caused this Hyperinflation
7. What can be done to overcome it

4. About Zimbabwe

5. Background about Zimbabwe
Fact
In Numbers
(1st January 2012)
Putting things into
perspective
Population 13 Million
About twice the size of
Dhaka.
GDP 6.21 Billion
46 times smaller than the
GDP of Bangladesh
GDP per Capita $500
Almost one third of what
each Bangladeshi earns
Unemployment 95% Highest in the world
Current President Robert Mugabe
Head the first
government as prime
minister on 4 March
1980

6. What is Inflation?

7. What is Inflation?
By inflation we mean a general rise in prices
throughout the economy. Government policy is
used to keep inflation both low and stable.
(J.Sloman,2001, 2nd edition, Pearson Education Limited. 'Essentials of Economics', pp.244-245)

8. How is inflation
measured?

9. Inflation: How Is It Measured?
A number of goods that are representative of the
economy are put together into what is referred to
as a "market basket."

10. Inflation: How Is It Measured?
A year is selected as the base year
1982

11. Inflation: How Is It Measured?
A market basket is made and the price of goods is
noted down
1982
$3.25 $3.00 $0.75
Total Price = $(3.25+3.00+0.75)
= $7

12. Inflation: How Is It Measured?
The base Consumer Price Index (CPI) is calculated
1982
$3.25 $3.00 $0.75
Base CPI =$7/$7
= 1 = CPI1

13. Inflation: How Is It Measured?
Repeating the same process for the year 2013
1982
$3.25 $3.00 $0.75
2013
$8.25 $5.00 $2.75
Total Price =
= 16
$(8.25+5.00+2.75)Base CPI =$7/$7
= 1 = CPI1

14. Inflation: How Is It Measured?
Calculating CPI for the year 2013
1982
$3.25 $3.00 $0.75
2013
$8.25 $5.00 $2.75
Base CPI =$7/$7
= 1 = CPI1
CPI2 = $16/$7
= 2.29

15. Inflation: How Is It Measured?
Increase in inflation rate for the year 2013
relative to 1982
=Increase in Inflation = (CPI2- CPI1)* 100 (2.29- 1.00) * 100
= 129%

16. What is Hyperinflation?

17. What is Hyperinflation?
In economics, hyperinflation occurs when a country
experiences very high, accelerating, and perceptibly
"unstoppable" rates of inflation. Two things happen as
a consequence:
1. General price level of goods and
services increase, meaning currency
loses real value.
2. The real values of economic items
generally stay the same.

18. What causes Hyperinflation?
Hyperinflation is often associated with wars, their
aftermath, sociopolitical upheavals, or other crises that
make it difficult for the government to tax the
population.
So, the government starts printing more money to
finance its expenditures and thus pumps money
into the economy.

19. And as a result of Hyperinflation
People can obtain less products for more
money
Currency devaluates
Prices of goods go up
People have more money to spend

20. Current situation in
Zimbabwe

21. Hyperinflation in Zimbabwe
0%
10000%
20000%
30000%
40000%
50000%
60000%
70000%
Inflation Rate
Inflation Rate

22. Due to Hyperinflation in Zimbabwe
A toilet paper would cost you $417
You have to spare a measly $50 Billion to buy an egg
They even have a 100 trillion dollar note!
And with ONLY two truck loads of money you could
pay your restaurant bill!

23. What caused this
Hyperinflation?

24. What pushed Zimbabwe into such
madness?
The three main causes of hyperinflation in Zimbabwe are
as follows:
1. Controversial Government land reforms
2. Drought
3. HIV/AIDS

25. Land Reforms
The prime contributor to Hyperinflation
The farm sector supplied about 60 percent of the
inputs to the manufacturing base—so agriculture was truly
the backbone of the economy.
Due to colonialism
4500 White Families owned most of the
commercial farms
Excellent productive capacity
Well-irrigated

26. Land Reforms
The prime contributor to Hyperinflation
The farm sector supplied about 60 percent of the
inputs to the manufacturing base—so agriculture was truly
the backbone of the economy.
Due to colonialism
840,000 black farmers eked out a living on the
communal lands
Completely barren
No water supply

27. Land Reforms
The prime contributor to Hyperinflation
Commercial Farms Communal firms
Had secure property titles
that gave farmers large
incentives to efficiently
manage the land
without property titles
allowed a banking sector to
loan funds for machinery,
irrigation etc.
Banks were reluctant to
provide loans

28. Land Reforms
The prime contributor to Hyperinflation
Then president Mugabe decided on Land Reforms
This essentially caused,
1. Seizure of commercial farms from
4500 white families
2. Redistribution of these farms
amongst black farmers

29. Land Reforms
The prime contributor to Hyperinflation
Then president Mugabe decided on Land Reforms
In practice, however,
Most plots ended up
in the hands of Mugabe’s political
supporters and government
officials, whose knowledge of
farming was meager.

30. Land Reforms
During the next 4 Years
INFLATION SOARED
Government started printing money to be able to afford goods in spite of
increasing prices
Price of goods went up
Economy began to shrink
Due to lack of expertise the black people were clueless as to what to do
with the commercial firms

31. Land Reforms
After Which..
The demise of the agricultural sector led to widespread famine
Without equity in the banking system, vast networks of economic activity
collapsed across all sectors of the economy
Because the government no longer enforced titles to land, there was far
less collateral for bank loans. Dozens of banks collapsed; those that did
not collapse refused to extend credit to farmers
Financial investors fled, wondering if other businesses might be seized
next. FDI fell to 0

32. Things that can be done

33. Possible Solutions
Dollarization
Freezing
government
spending
Stop printing
currency
Increase Taxes

34. Dollarization
Occurs when the inhabitants of a country use
foreign currencyin parallel to or instead of
the domestic currencyas a store of value, unit
of account, and/or medium of exchange within the
domestic economy.
This is effectivebecause the real value of
non-monetary items does not
decrease, what decreases is the value of the currency
with which those commodities are bought.

35. Freezing Government Spending
Inflation would decrease
There is no need for central bank to print any more
money
If government decreases its spending
The central bank printed money to facilitate
government spending

36. Stop Printing Currency
Eventually, Inflation would decrease
Price of goods and services go down
Less money circulates the economy
Printing less money would ensure

37. Conclusion
When all these policies are in place, hopefully, the
inflation will die down and Zimbabwean economy would
see better days

38. THANK YOU