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Dollarization of Zimbabwe Economy Appears To Vanquish Hyperinflation

Consumer prices in Zimbabwe declined in January and February according to the country's Central Statistical Office, suggesting that the substitution of U.S. dollars and other hard currencies for the virtually worthless Zimbabwean dollar has vanquished hyperinflation.

The statistical authority said prices fell 3.1% in February from the month earlier, and declined by 2.3% in January from December levels, a stunning turnaround from the last inflation rate officially announced by the CSO of 231 million percent in July of last year.

Some prominent international economists including hyperinflation expert Steve Hanke of the Johns Hopkins School of Applied Economics reckoned Zimbabwean hyperinflation reached percentage gains in the quintillions and sextillions before they stopped measuring.

Hanke in a monograph on Zimbabwean hyperinflation had recommended among other cures a currency board system in which the local currency would be rigidly pegged to the U.S. dollar, but the gradual adoption of the greenback and South African rand by businesses and the general population as a surer store of value has had much the same effect.

Nearly all goods and services in Zimbabwe are paid for with hard currency and the Zimbabwe dollar has fallen out of use except for paying certain official fees and fines.

Finance Minister Tendai Biti has predicted inflation will fall to 10% by the end of 2009.

Economist John Robertson cautioned in an interview with reporter Blessing Zulu however that that although food prices have been declining, the same cannot be said of services including fixed-line and mobile telephone accounts now billed in dollars.

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