WHAT CAUSED ZIM CURRENCY FALL IN 2008-9

Inflation graph in Zimbabwe showing executive order sanctions caused inflation

ZDERA Sanctions?

According to the attached inflation and money supply graph, in 2001, #ZDERA was imposed on Zimbabwe by the U.S. Congress, and the inflation rate rose from 80% to 350% between December 2001 and November 2003 when executive order sanctions were imposed on 80 investors, companies, politicians, and individuals.

Executive Order Sanctions?

From 2003-2006, after imposition of the first executive order sanctions #EO13288 by the U.S. President, inflation rose marginally for a short time to the beginning of 2005 and then went down from 350% to 120%.

Then, from November 2005, another 80 parastatals, companies, government officials, and investors were added to executive orders sanctions #EO13391, and inflation rose to over 9000% in three years.

Money Printing?

From 2001 to 2007, the RBZ (Reserve Bank of Zimbabwe) increased money supply by only 100% or 13% compounded per annum (less than U.S. quantitative easing over the same period) while inflation was over an average of 1000% per year.

The mass printing of money only began in earnest after the U.S. President added the government of Zimbabwe, all municipalities, all parastatals, government companies like IDC, ZISCO steel, Willowvale; government banks like RBZ, ZB Bank, InterMarket, Scotfin, etc; private companies doing business with the government; and 144 other listed major investors like Bredenkamp, Rautenbach, Van Hoogstraten and such, associated companies and politicians to the executive order sanctions #EO13469 in July 2008.

Observations.

So, looking at the inflation and money supply graph, it would seem that Zimbabwe’s inflation started way before the RBZ began printing money [in July, 2008], and it turned into stagflation and the worst inflation in the world before government printing presses began to print money to buy US dollars off the black market to keep the nation’s critical function (buying fuel, medicines, fertilizers, seeds, reagents and vehicles) going.

We have seen that even though ZDERA existed between 2001 and 2005, inflation actually fell by over 50% under ZDERA and the first executive order sanctions, until the second set of executive order sanctions EO13391 came in October 2005 and devastated the economy.

The country’s inflation would surpass 9000% in January, 2008, to over 1 billion percent between July 2008 and February 2009 when the Government of National Unity was signed. This followed the introduction of the executive orders EO13469 upon government, its companies, banks, institutions, and private businesses that do business with the government, basically these became blanket sanctions upon the whole nation.

So now that these notorious executive order sanctions that broke the Zimbabwean economy have been removed by the American President, in an environment where the U.S. is shifting its policy on Zimbabwe from aggression to mending bridges, should inflations be rising under ZDERA and individual Magnitsky sanctions upon 11 individuals?

According to history between 2001 and 2005 when we were under ZDERA and executive sanctions on 80 entities and individuals, the numbers say no. Moreover, as a nation we have developed measures to mitigate sanctions better than before, but it is the use of the world’s reserve currency as our local currency, externalization of that currency, the lack of savings in our banks, money trading, smuggling of precious resources and taking advantage of the arbitrage created by the illegal sanctions, that has becoming a scourge upon our currency. We need a mind change in Zimbabwe to build our nation.

Written by Rutendo Matinyarare, Chairman of ZASM.