Worried About Inflation? Try Zimbabwe's 1,000 Percent
Worried About Inflation? Try Zimbabwe's 1,000 Percent
Melissa Block talks with Zimbabwean economist John Robertson about the massive inflation in real prices caused by the devaluation of government currency. Anecdotes in recent news reports put prices for goods such as bread and orange juice at as much as 500,000 Zimbabwe dollars — or five U.S. dollars.
MELISSA BLOCK, host:
Inflation may be a worry in this country, but in Zimbabwe in southern Africa it is crippling the economy. The annual inflation rate there has topped 1,000 percent for the first time. Economists say that's the world's highest. Zimbabwe is facing serious shortages of food and fuel. Unemployment is estimated at 80 percent.
John Robertson is an economist in the capital, Harare. Thanks for being with us.
Mr. JOHN ROBERTSON (Economist, Zimbabwe): You're welcome, thank you.
BLOCK: Help us understand, if you could, on a daily basis, if the annual inflation rate is 1,000 percent, what do things cost? Say a loaf of bread?
Mr. ROBERTSON: A loaf of bread is not at more than 100,000 Zimbabwe dollars. You can get a lower quality loaf for 95,000, but a lot of the better quality bread you'd be paying something like 120,000 dollars for a loaf.
BLOCK: And in U.S. dollars, what would that be?
Mr. ROBERTSON: That comes to about $1.20.
BLOCK: And compare that, say, with how it might have been a month ago.
Mr. ROBERTSON: A month ago we were looking at 65,000 Zimbabwe dollars, so it's gone up nearly 100 percent in maybe six weeks.
BLOCK: What is the biggest denomination of Zimbabwean currency?
Mr. ROBERTSON: The highest bank note we have is $1,000, which is worth about one American cent.
BLOCK: So people are just carrying around huge wads of cash?
Mr. ROBERTSON: Yes you need to be carrying five, ten, twenty million dollars with you if you plan to do any shopping. In an ordinary supermarket trolley you can easily get $30 million worth of groceries.
BLOCK: And salaries, it goes without saying, for those who have jobs, wouldn't even come close to keeping up?
Mr. ROBERTSON: I think the salary nowadays is around about one million dollars a day and a million dollars will not buy you a 200 gram jar of coffee.
BLOCK: So what are people doing?
Mr. ROBERTSON: They're battling and trading down, moving down market with their purchases, trying to make sure that they get the basics, as much of the requirements of ordinary staple foods as they can and most people now are dong without the things that used to be considered fairly normal fare. Nowadays those are considered luxuries.
BLOCK: Is it a situation now where things are so bad and inflation has spiraled so wildly out of control that there are fears of widespread famine and starvation?
Mr. ROBERTSON: I think at this stage, we can speak of malnutrition affecting a great many people. In the food products, it's the high protein foods that are most expensive. The price of eggs and milk is very high and of course all of these have been very badly affected by our land reform program. So we've lost about half of our dairy farmers. We've probably lost nearly half of the pig producers. I think we've lost more that three quarters of the beef producers and with all of these developments the prices are rising to levels that make the purchase of protein foods very difficult for many families.
BLOCK: One of the factors that contributed to this inflation problem was the policy under President Mugabe to seize commercial farms that was owned by white farmers, going back about six years or so.
Mr. ROBERTSON: Yes, that is true and the issue's badly confused by the fact that it was mostly white farmers that were running the large scale farms. Our former commercial farmers operated at a profit. The new farmers that have taken over their lands are operating at massive losses and most of them are not even prepared to take the risks that go with the farming and the government, in order to try to keep them on the land, is very, very heavily subsidizing them and those subsidies are beyond our means and in paying the subsidies they have to print the money to do so and their causing inflation.
BLOCK: What could turn things around? What could take a 1,000 percent annual inflation rate and bring that down to some manageable level?
Mr. ROBERTSON: The difficulty here is that the right policies to bring the economy back online are very painful political decisions that I think would prove, at this stage, too painful for the government to take. The political disciplines would have to be brought in to control the printing of money, to literally stop printing money. Other difficult political decisions would be to say we need to get the producers back onto the land, the people who know how to use it, and so it would be politically unpopular to the people who have been given land to have that land taken away from them again.
Unfortunately these are the decisions needed to bring this problem to the beginnings of a resolution and if they choose not to take them, then our 1,000 percent inflation could easily become 2,000 percent inflation within a few months. And after that typically governments become very, very unstable and they have to deal with the consequences of inflation at that sort of level.
BLOCK: Well, John Robertson thanks very much for talking with us today.
Mr. ROBERTSON: You're very welcome, thank you.
BLOCK: John Robertson is an economist in Harare, Zimbabwe.
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