Sunday, January 11, 2009

Worthless Billions in Zimbabwe

Tiffany Shorter

In the height of an economic mess, Zimbabwe’s central bank will introduce new bank notes of $20 billion and $50 billion. Two loaves of bread cost nearly $50 billion. Is there best solution to fight cash shortages amid an era of unprecedented inflation?

The country is struggling with hyperinflation, which is now officially estimated at 231 million percent.Currently, one US dollar trades at around ZW$25 billion. Zimbabwe’s solution to resolve the crisis is to repeat tactics- which some would call failed tactics.When the government issued a $10 billion note three weeks ago, it bought 20 loaves of bread. That note now can purchase less than half of one loaf. So now the government will issue more money.Does it expect that this will raise the value of its currency? When confronted by this obvious downfall, President Robert Mugabe blames this situation on Western powers who are successful at undermining his efforts.

No comments: