Tuesday January 29, 2008

Zimbabwe: IMF estimates inflation at 150,000%

allafrica.com :

An International Monetary Fund (IMF) document says Zimbabwe's inflation for January has galloped to about 150,000% as the economy continues to crumble. This is the same rate reached by Germany during the Weimar Republic in the 1920s in the post-First World War era. The government has refused to release inflation figures for the past eight months, ostensibly to hold down the prices of basic commodities. That plan is collapsing as businesses now use their own inflation figures to raise prices. The result has been a huge surge in prices forcing government to implement price controls which have however failed.

The document blamed the inflation rise on the government's over reliance on money printing to fund its operations. It said the foreign currency rate mismatch was also at the root cause of the spiralling inflation. The document said the introduction of a new currency does not help reduce inflation unless it is accompanied by broad based stabilisation reforms. Analysts said the recent decision by the central bank to go on a money printing spree to ease the cash crisis would worsen the inflation problem. The document said only 13 countries have experienced hyperinflation since 1950. Average duration of hyperinflation is 17 months, the longest is 59 months which was experienced by Nicaragua.

- I have been following Zimbabwe's path down the slippery slope of hyper-inflation with a mixture of horror and morbid fascination for the past few years. It probably started off slowly, almost un-noticeably, then snowballed as inflation accelerated and took off exponentially.

Could we be seeing the same thing happening on a larger, global scale? Many major central banks are already having M3 money supply growth rates of 10%, 20% or higher. Inflation is getting more noticeable across the world. China's CPI inflation rate has gone up to 6.9%. Japan, known for its long-drawn deflationary period, has reversed this trend and is starting to see inflation take off. And over in Singapore, we have had 4.4% CPI inflation, the highest in 25 years. If the central banks of the world choose to go down the same path as that of Zimbabwe, then we are in for the ride of our lives.

See also :

1. Zimbabwe : Not Reality TV
2. Zimbabwe on brink of financial collapse [1000% inflation back in Jan 2004]
3. Zimbabwe money loses three zeros
4. Peak Oil Crisis : Zimbabwe

(2008-01-29 20:00:11 SGT) [Biz] Permalink

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