US-based economist and currency expert Steve Hanke has raised alarm over Zimbabwe’s skyrocketing inflation, which he estimates to have reached 880% per year, declaring the economy is “up in flames.”
Hanke’s grim assessment comes as the country continues to struggle with the rapid depreciation of its currency, despite efforts by the Reserve Bank of Zimbabwe (RBZ) to stabilize the economy. In April, the RBZ introduced the Zimbabwe Gold (ZiG) currency in a bid to replace the struggling RTGS and Bond Notes, which had lost significant value. The new currency was backed by 2.5 tonnes of gold and reserves of foreign currency, with the hope of restoring confidence and stabilizing the economy.
However, six months after its introduction, the ZiG currency has sharply depreciated. On the black market, it now trades at ZWG30 for US$1, while the official interbank exchange rate stands at US$1
.95, reflecting a growing disconnect between official rates and market reality.
In response to the currency’s decline, the central bank recently rolled out a series of measures aimed at propping up the local currency. These include injecting US$64 million into the Interbank Market in September alone to absorb excess ZWG liquidity and curb the soaring exchange rates.
Despite these efforts, Zimbabwe’s economy remains under severe strain. A recent report jointly released by the World Bank and the Confederation of Zimbabwe Industries (CZI) revealed that the country lost over US$3 billion between 2020 and 2023 due to the mismanagement of its exchange rate system.
“Zimbabwe’s money supply (M2) is growing at an alarming rate of 253% per year. As night follows day, I can accurately measure Zimbabwe’s inflation at a staggering 880% per year,” Hanke wrote on his X (formerly Twitter) account on Wednesday. “Zimbabwe’s economy is up in flames.”
Adding to the growing economic crisis, Zimbabwe’s largest retailers have warned that they are on the verge of shutting down operations due to mounting losses caused by the distorted exchange rate policy. With inflation spiraling and confidence in the local currency eroding, the country faces an uphill battle to regain economic stability.