A 25 Billion-Dollar Orange

This weekend, all CNBC TV18s, NDTV Profits, Business Standards, and moneycontrol.coms have been talking about inflation hitting a 13-year peak of 11.89%. If Indians were extremely distressed a month ago with inflation reaching double digits, Zimbabweans are apprehensive about it reaching nine digits. Yes, there is no typo there, the inflation in Zimbabwe is at 9 million percent, and economists predict it would reach 100,000,000% by the end of Q3.

Zimbabwean government has been introducing new currency notes every few weeks, and the current denominations they are available are 100 million, 500 million, 25 billion, and 50 billion. This Monday, a new 100-billion-dollar-note would be in circulation, with an expiry date of 31st December 2008. This new note, however, would not buy you a loaf of bread in Zimbabwe, which costs at least 120 billion. You can pay for four oranges instead.

An article on timesonline.co.uk reports:

Another friend recounts a weekly shop costing $514 billion, which she paid for by debit card. The shop till could only ring up $9 billion, so the card had to be swiped 57 times. By the time 57 swipes were made, ZWD soared higher and it had to be swiped 8 more times; at the end of 8 one more to finally make it even.

Okay I made the last part up. But the rate at which the currency is falling, the numbers are almost meaningless. Friday's exchange rate was 24,782,853,660 ZWD = 1 USD (Source: oanda.com). That means four oranges still cost four American dollars. But I wonder how do they figure out such figures down to the tenth significant figure.

Sample this restaurant bill dated earlier this year. Today, bills are of similar
numbers, but restaurants ask you to add six zeroes to the end before making the payment in mollars-millions of dollars. They might have to up the amount by a few million dollars if they use a larger sheet of paper and some extra toner to print all the digits. Cheques are refused at many places as their value would plummet by the time they are presented to the bank. Those who accept cheques ask for double the amount than that would have been paid by cash. There is a placeholder for gratuity too on this Jungle Junction bill. How many millions would you tip?

Who wants to be a millionaire? in Zimbabwe would be renamed as Who wants to be a quadrillionaire? next week, and Who wants to be a sextillionaire? three weeks hence. Billionaire lists would contain almost everyone on the census. Organizations have weekly appraisals and salary reviews in order for them to make sense.

Jokes apart, this indeed is a matter of concern. I am astonished at how is Zimbabwe still struggling in the face of economic collapse. Equally surprised I am at the Weimar Republic of Germany having faced hyperinflation in 1923, when people used currency notes in stoves because they would burn longer and provided more heat than the amount of firewood that that money could buy, and today Germany is one of the world's most advanced market economies.

Some more assorted statistics of interest:

• At Independece in 1980, the Zimbabwean dollar stood equal to 1.25 USD, inflation at 7%.
• In August 2006 the Reserve Bank of Zimbabwe revalued the Zimbabwean Dollar by 1000 ZWD to 1 (revalued) dollar.
• Burma stands a far second on the list of countries with hyperinflation at 39.5%.
• Inflation in Zimbabwe touched triple digits in 2001, four digits in 2006, five in 2007.
• Year-on-year inflation for 2007 in the USA was 2.7%, Germany 2%, France 1.5%, Japan 0%, and Naurau -3.6%. The complete list is here. (Source: indexmundi.com)