Accessibility links

Monetary Expert Hanke Says Zimbabwe Inflation Hits 531 Billion Percent

Hyperinflation in Zimbabwe has reached the astonishing annual rate of 531 billion percent, says U.S. economist Steve Hanke, a professor of applied economics at Johns Hopkins University in Baltimore and a senior fellow of the Cato Institute in Washington.

Hanke, a monetary policy expert who has advised a number of countries on curbing hyperinflation and implementing currency reforms, has posted his estimate of Zimbabwean inflation on the Cato Institute Web site, which promises weekly updates.

The Cato Institute site acknowledges that "it is difficult to quantify the depth and breadth of the still-growing crisis in Zimbabwe," but says Hanke developed a special index "derived from market-based price data" covering the period from January 2007 to the present.

Hanke said in an interview that his inflation estimate is "based on market prices in the exchange-rate market in Zimbabwe - that's the fundamental basis that requires...a lot of calculation...but its based on what's going on in the exchange market over time."

He said monthly inflation is now running at 14,000 percent, though that is still less than the rate seen in Germany in the 1920s which peaked at around 30,000 percent a month.

The table posted on the Cato site shows inflation surging from 215,000% in December 2007 to 41.5 million percent in June of this year (when Zimbabwean authorities estimated it at a mere 11.2 million percent) and soaring to his estimated 531 billion percent as of Sept. 26.

In a recent monograph on Zimbabwean hyperinflation Hanke blamed the phenomenon on money-printing by the Reserve Bank of Zimbabwe "at a rate that even exceeded that of Germany's central bank from January 1921 to May 1923."

Hanke noted in an interview with reporter Carole Gombakomba of VOA's Studio 7 for Zimbabwe that the last official data from the government showed inflation running at an annual rate of 11.2 million percent, but that was four months ago in June.

Zimbabwean economist Godfrey Kanyenze of the Labor and Economic Development Research Institute in Harare questioned Hanke's estimate, however, saying that it is hard to obtain reliable data as most goods are only sold on parallel markets.

A similar analysis circulated in early September by Zimbabwean economist John Robertson estimated annual inflation at the end of August of 2.1 billion percent, and projected annual inflation as of the end of September at 26.7 billion percent.

The Zimbabwean central bank in August lopped 10 zeroes off the currency and issued new bank notes to relieve chronic shortages of cash, but this week it issued more new bills in denominations of Z$10,000 and Z$20,000 in an unsuccessful effort to meet demand.

Many Zimbabweans are spending a good part of their days in line at banks to withdraw the current maximum of Z$20,000 which will no longer purchase a loaf of bread.

More reports from VOA's Studio 7 for Zimbabwe...