Pulling out a one-million-dollar bill to pay for a loaf of bread sounds like a joke. But it was a reality for people living in Zimbabwe during the late 2000s. It was a time when people living in that country could say they were a millionaire, although it wasn’t necessarily something to be proud of. Why? Let’s find out.
Key takeaways
You’ll learn about:
- What everyday was like for Zimbabweans
- Why they had a million-dollar bill
- How the nation’s money lost value so quickly
- How the financial crisis ended
Where this happened, and the time window
The problems began in Zimbabwe. The country is in southern Africa and it’s between South Africa, Mozambique, Zambia & Botswana. Things really started to go bad there in 2007. Inflation spun out of control, causing prices to skyrocket.
How did this happen?
Budget gaps & central bank stopgaps
Like with most issues, it took a while for these problems to first emerge. The nation’s government was desperately running out of cash during the mid-2000s. Spending was more than what they could cover. But they chose not to cut back & the bank instead chose to foot the bill for many public programs, including farm support and bailouts.
It then decided to print more money to fill the financial hole as an initial temporary measure. Unfortunately, the bank never stopped. Prices continued to climb while the value of money stopped stretching as far, so inflation went out of control.
Shrinking output and fewer dollars coming in
More money hit the streets, but companies produced less stuff for people to buy. Years of disruption had already caused issues for farming. Now, harvest numbers continued to fall, so Zimbabwe’s export numbers also fell. There were fewer American dollars coming into the country.
The lack of exports caused the trade gap to widen. Shops couldn’t stock fast enough & factories struggled to find imported parts, so everything that relied on foreign currency was now more expensive. As for the economy, it shrank overall. That only made the financial issues worse.
How fast prices moved
Prices began doubling at a rate that people couldn’t keep up with, sometimes changing multiple times in a day. Monthly inflation was at a percentage rate in the billions, so the money people received on payday was practically useless a few days later.
Zimbabweans could go to the market in the morning, only to find out that prices were double at dinner time. People feared that prices would increase & they would buy whatever they could the moment they got paid. It was a time when saving cash had no benefits.
When “millionaire” became normal
The first real million note hit circulation in Zimbabwe in January 2008. The Reserve Bank of Zimbabwe released a Z$1,000,000 bearer cheque, simply because it needed to keep up with rising prices. Such a note was something that normal people needed, rather than collectors. Regular bills couldn’t buy them much.
It actually got so bad that people couldn’t buy something as simple as a bus fare without a huge amount of cash. Teachers & shopkeepers began carrying these hefty bills in their pockets practically overnight.
The notes people actually carried
During this time, the central bank continued to print money. They began with millions. They moved on to billions. But even that wasn’t enough, so they started printing a 100-trillion-dollar bill in 2009, although it was only worth a few U.S. dollars. Many people put their value into physical goods like fuel & soap. They simply needed something that would hold its price for a week.
People were forced to use this money to buy groceries & pay for rent. They also bought bus fares this way. While the notes did look rather impressive, their buying power was practically gone.
A single loaf of bread could cost someone Z$2 million, while a taxi ride across town would likely be several million more. Several workers were paid daily instead of monthly. Why? Because prices were changing too quickly for salaries to keep up.
Shops rewrote price tags constantly, and people started using calculators at the checkout to figure out how many zeroes they needed to count. Cash ran short, and even basic goods became a math problem.
What ended the “millionaire” moment
Finally, in April 2009, the Zimbabwean government decided they had had enough & chose to stop printing the national dollar. They used other currencies instead. These were mostly U.S. dollars & the South African rand, but they also tried using other currencies, as long as they were stable.
Switching the currency stopped the price from spiraling and ended the nation’s inflation issues. Shops now began to price things normally again. However, the economic consequences continued to affect the country for many years.
The following sources were consulted in the preparation of this article:
- Zimbabwe: 2009 Article IV Consultation—Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Zimbabwe
- Zimbabwe: Challenges and Policy Options after Hyperinflation
- Hyperinflation in Zimbabwe: money demand, seigniorage and aid shocks
- Inter-temporal Changes in Well-being During Conditions of Hyperinflation: Evidence from Zimbabwe
- Hyperinflation in Zimbabwe
- A Dynamic Enquiry into the Causes of Hyperinflation in Zimbabwe
- Country report on the state of plant genetic resource for food and agriculture
- The Recovery and Transformation of Zimbabwe’s Communal Areas
