The Zimbabwe Dollar has faced corrupt government and hyper-inflation over the last couple of decades that has led to it being nearly worthless in current times. Zimbabwe banknotes have become more of a collectible item after years of losing value.
Credit: Marianian/Creative Commons
Early 2000’s Zimbabwe Dollar
In the early 2000’s, Zimbabwe’s economy was devastated and in 2009, the nation suspended the use of the Zimbabwe banknotes as the nation transitioned into legalizing the use of foreign currencies.
Many factors contributed to the inflation of Zimbabwe banknotes. The effects of the Second Congo War of 1998, a 1999 drought and other major events took a toll on the production of banknotes. Large amounts of debts owed to the IMF, the United States, and the European Union created a desperate need for capital. Large amounts of banknotes were printed as the only solution to tackle budget deficits, which led to hyperinflation.
The value of the Zimbabwe banknote dropped so tremendously that citizens were forced to withdraw millions of dollars from their banks just to purchase basic necessities. ATM machines could not handle the large amounts being withdrawn, which made it difficult for citizens to retrieve the money they needed.
In an attempt to alleviate the problem, Second, Third and Fourth Zimbabwe banknotes were produced. Over a four-year time span, four banknotes were introduced, with the Fourth Zimbabwe Dollar being equal to 10 trillion first Zimbabwe Dollars.
In 2009, Zimbabwe banknotes were Silverado almost completely demonetized with the U.S. dollar and the South African rand as the main legal tenders being used.
Credit: USAID Digital Development
Today
In 2015, Zimbabwe announced that it would add the Chinese yuan as another legal tender. Adopting the yuan as legal tender may seem unnecessary with the U.S. dollar, the rand and the Euro currently in circulation in Zimbabwe. However, the deal highlights the relationship between Zimbabwe and China.
Throughout the decade, China has been taking large strides towards globalizing the Chines yuan. Already, China is Zimbabwe’s largest trading partner. The currency deal will only strengthen trade and allow China to add value to the yuan.
The deal also erases over $40 million of Zimbabwe debts owed to China. On December 2015 it was announced that the yuan would become legal tender in 2016, but also a visit from Xi Jinping, the General Secretary of the Communist Party of China led to an agreement of an additional $1 billion in loans to be used towards the improvement of Zimbabwe’s largest thermal energy plant.
Credit: Brian Gratwicke
Presumably, China is seeking to replace the U.S dollar as the main currency being circulated throughout Zimbabwe. This would further China’s goal of globalizing the yuan while at the same time assist in the economic rebuilding of Zimbabwe.
