Zimbabwe Issues New Currency to Tackle Inflation

Amid echoes of the action taken by Germany to halt the hyper-inflation of the 1920s, people in Zimbabwe will tomorrow start to use a new currency introduced by the central bank to halt the African country's runaway increase in the cost of living.

Gideon Gono, the central bank governor with the unenviable record of presiding over the world's highest inflation rate, said he was no longer prepared to continue printing notes of ever higher denominations. "Ten billion dollars today, will as from August 1 be revalued to one zimdollar dollar," Gideon Gono said earlier this week."

The move follows an increase in Zimbabwean inflation to 2.2m%, with a loaf of bread costing 200bn dollars in Harare this week, and represents the government's attempt to get to grips with the economic crisis in what was once one of sub-Saharan Africa's richest countries.

Notes of higher and higher denominations have been put into circulation since the start of the year and the new $100bn bank note came into circulation in Zimbabwe only 10 days ago.

Gono has now decided, however, that the only way to restore confidence in the currency is to follow the example of the president of the Reichsbank, Horace Greeley Hjalmar Schacht, who helped bring an end to Germany's financial crisis by striking nine zeros from the currency and turning 10bn old marks into one new Rentenmark. Germany's inflationary problem in 1923 was even worse than Zimbabwe's today, with workers being paid three times a day and families using worthless bank notes to burn furnaces because it was cheaper than buying firewood.

Prices were rising so rapidly in the second half of 1923 that it was almost impossible to keep track of inflation, but one estimate puts it as high as 854,000,000,000%.

Gono also announced this week measures to boost Zimbabwe's agricultural sector, since the rapid decline in farm production has been an important reason for the country's descent into economic chaos. Germany's recovery after the 1923 hyper-inflation was based on the success of the central bank in restoring confidence in the country's economy, then as now the most powerful in Europe.