The Zimbabwean dollar was the official currency of Zimbabwe between 1980 and 12 April 2009. The Zimbabwean dollar was subdivided into 100 cents. It was normally abbreviated with the dollar sign $ , or alternatively Z$ to distinguish it from other dollar-denominated currencies. It was also one of the lowest-valued currencies in the world due to massive inflation and three redenominations. It was suspended indefinitely on 12 April 2009. Today, other currencies are exclusively used for transactions in Zimbabwe instead.
History
The Zimbabwean dollar and its predecessor, the Rhodesian dollar, were not true dollars as they were not a direct descendant from the Spanish pieces of eight, as is the case with the US dollar, the Canadian dollar and the East Caribbean Dollar. The Rhodesian dollar was essentially equal to half of a pound sterling when it was adopted during the decimalisation of 1970, the practice which was followed in other Commonwealth countries such as South Africa, Australia, and New Zealand. The selection of the name was motivated by the fact that the reduced value of the new unit correlated more closely to the value of the US dollar than it did to the pound sterling.
First dollar
The first Zimbabwean dollar was introduced in 1980 and replaced the Rhodesian dollar at par. The initial ISO 4217 code was ZWD . At the time of its introduction, the Zimbabwean dollar was worth more than the U.S. dollar, with ZWD 1 = USD 1.47. However, the currency's value eroded rapidly over the years. On 26 July 2006, the parallel market value of the Zimbabwean dollar fell to one million to the British pound.
Second dollar
In October 2005, the head of the Reserve Bank of Zimbabwe, Dr. Gideon Gono, announced that "Zimbabwe will have a new currency next year." New banknotes and coins were to replace the then current Zimbabwean dollar. Gono did not provide a name for this new currency. In June 2006, Deputy Finance Minister David Chapfika stated that Zimbabwe had to achieve macroeconomic stability (i.e., double digit inflation) before any new currency was introduced.
The dollar was redenominated on 1 August 2006 at the rate of 1 revalued dollar = 1000 old dollars. The new dollar is subdivided into 100 cents, although cents are not used in practice. Together with the redenomination, the government devalued the dollar by 60% against the US dollar (see exchange rate history table below), from 101,000 old dollars (101 revalued) to 250 revalued dollars. ISO originally assigned a new currency code of ZWN to this redenominated currency, but the Reserve Bank of Zimbabwe could not deal with a currency change. Therefore the currency code remains 'ZWD'. The revaluation campaign, which Gideon Gono named "Operation Sunrise" was completed on 21 August 2006. It was estimated that some ten trillion old Zimbabwe dollars (22% of the money supply) were not redeemed during this period.
On 12 December 2006, Dr. Gono hinted in a memorandum to banks and other financial institutions that he would lay out the next phase of his monetary reforms dubbed Project Sunrise Two when he announced the monetary policy review statement in January 2007. It was not possible to get immediate confirmation from Gono's office whether the memorandum was advice to banks that he would be launching the new currency in January. But the chief executive officer of one of the country's largest banks said industry players had understood the governor's memo to mean new money would be introduced next month. A possible name appeared to be "ivhu", which means "soil" in Shona.
The following year, on 2 February 2007, the RBZ revealed that a new (third) dollar would be released soon and gave some details of the new banknotes (see below). However, with inflation at the time still in the four digits, the banknotes remained in storage. During the same month, the Reserve Bank of Zimbabwe declared inflation illegal, outlawing any raise in prices on certain commodities between 1 March and 30 June 2007. Officials have arrested executives of some Zimbabwean companies for increasing prices on their products. Economists generally suspect that such measures will be ineffective at eliminating the problem in the long term.
Economist Eddie Cross reported on 15 June 2007 that "There is talk that the Reserve Bank will cut another three zeros off our currency next week and this would mean that one Zimbabwe dollar would now equal one million of the old dollars. Chaos reigns in commerce and industry and those in the public sector are frantic."
The Zimbabwe dollar was again devalued on 6 September 2007, this time by 92%, to give an official exchange rate of ZW$30,000 to US$1, although the black market exchange rate was estimated to be ZW$600,000 to US$1.
Meanwhile the WM/Reuters company introduced a notional exchange rate (ISO ZWN) which more accurately reflected black market exchange rates. Since there was a shortage of foreign exchange in the country the official rate was nearly impossible to obtain. The method of calculation was based on Purchasing Power Parity utilizing the dual listing of companies on the Harare (ZH) and London Stock exchanges (LN).
Third dollar
Reserve bank governor Gideon Gono announced on 30 July 2008 that the Zimbabwean dollar would be redenominated. Effective August 1, 2008, ZW$10 billion would be worth ZW$1; the new currency code was ZWR . The planned denominations to be issued are coins valued Z$5, Z$10 and Z$25 and banknotes worth Z$5, Z$10, Z$20, Z$100 and Z$500. While the German firm of Giesecke & Devrient is no longer printing Zimbabwean currency, The Daily Telegraph reported that the new currency was printed before the relationship was severed and has been kept in storage since then.
Due to frequent cash shortages and the worthless Zimbabwean dollar, foreign currency was effectively legalised as a de facto currency on 13 September 2008 via a special program to officially license a number of retailers to accept foreign money. This reflected the reality of the dollarization of the economy, with many shop keepers refusing to accept Zimbabwe dollars and requesting U.S. dollars or South African rand instead. Despite redenomination, the RBZ has been forced to print banknotes of ever higher values to keep up with surging inflation, with ten zeros reappearing by the end of 2008 (see below).
As of the 29th January 2009 all Zimbabweans are to be allowed to conduct business in any currency.
Fourth dollar
On February 2, 2009, the RBZ announced that a further 12 zeros were to be taken off the currency, with 1,000,000,000,000 (third) Zimbabwe dollars being exchanged for 1 new (fourth) dollar. New banknotes are to be introduced with a face value of Z$1, Z$5, Z$10, Z$20, Z$50, Z$100 and Z$500. The banknotes of the fourth dollar are to circulate alongside the third dollar, which remained legal tender until 30 June 2009. The new currency code was ZWL .
The Zimbabwean dollar is now largely irrelevant with the economy being almost completely dollarised. Even the national postal service, Zimpost, is said to be charging customers postage in US Dollars, even though some of the stamps are in Zimbabwean Dollar denomination.
Zimbabwe finance minister, Tendai Biti, said in his first budget report, "The death of the Zimbabwe dollar is a reality we have to live with. Since October 2008 our national currency has become moribund."
On April 12, 2009, media outlets reported that economic planning minister Elton Mangoma has announced the suspension of the local currency "for at least a year", effectively terminating the fourth dollar.
Inflation
Rampant inflation and the collapse of the economy have severely devalued the currency, with many organizations using the US dollar, the euro, the pound sterling, the South African rand, or the Botswana pula instead. Early in the 21st century, Zimbabwe started to experience hyperinflation. Inflation reached 623% in January 2004, then fell back to low triple digits in 2004 before surging to 1,281.1% in 2006.
Inflation reached another record high of 3714% (year-on-year) in April 2007. The monthly rate for April 2007 exceeded 100%, implying that inflation may soon exceed all forecasts, as 100% monthly inflation over sustained 12 months would produce annual inflation of over 400,000%. Mid-year inflation for 2007 has been breaching records as inflation for May 2007 was estimated at 4,530% (year-on-year).
On 21 June 2007, the United States ambassador to Zimbabwe, Christopher Dell, told The Guardian newspaper that inflation could reach 1.5 million percent by the end of the year. The unofficial inflation rate at that time was above 11,000%, and the black-market exchange rate was Z$400,000 to the pound.
On 13 July 2007, the Zimbabwean government said it had temporarily stopped publishing (official) inflation figures, a move that observers said was meant to draw attention away from "runaway inflation which has come to symbolise the country's unprecedented economic meltdown."
On 27 July 2007, the Consumer Council of Zimbabwe (CCZ) said its recent calculations for the monthly expenditure for an urban family of six showed that inflation for the month of June was more than 13,000%. The Central Statistical Office (CSO), the official source of Consumer Price Index numbers, had not released its figures since February (2007) when it r
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