Inflation in Zimbabwe – winners and losers

Yesterday I was talking to an old friend of mine in Zimbabwe, a white guy who used to live next door to me. I asked him what life was like there and how inflation was effecting life.

 

Inflation: To the moon and back but a money spinner for the wealthy

 

When I left Zimbabwe, one Zimbabwe dollar was about equal to one US dollar. Apparently, at the current exchange rate, if you piled up all the one dollar Zimbabwe bills it would take to buy one US dollar on top of each other they would more than reach the moon and back!! 

 

For people like my father who get a government pension, the total annual amount is apparently not enough to buy one coffee a month.

 

But on the other hand there are people who are making big money out of inflation. He gave an example of a common friend who had borrowed the equivalent of US$300,000 for one year from a bank in Zimbabwe. Apparently the moment he got the money he managed to convert it into US dollars. When the time came to pay the money back at the end of the year it cost him the equivalent price of two coffees in US dollars. In other words he had made US$300,000 in one year for the price of two coffees and all he had done was borrow in Zimbabwe dollars, convert to US dollars and hold.

 

So who is losing out on this deal – the average person on the street who has their money in the bank. Yet another case of privatising the gains and socialising the loses. The Zimbabwean equivalent of a Wall street banker.

 

So if you think life is tough in Zimbabwe it is for many but for many others it is still the “good life”. If you simplistically measure the quality of life by the antiquity of the cars people drive then apparently Zimbabwe is doing better than New Zealand!

Advertisements

Leave a comment

Filed under Economics

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s