Another Zimbabwe?

Out-of-control debt led Zimbabwe, once one of the strongest economies in Africa, into economic ruin and a humanitarian crisis that has yet to be resolved.

Descent into Debt: Zimbabwe’s Story

Some critics worry that our escalating national debt will lead to an inflationary crisis. A look at the first inflationary crisis of the 21st century, in the African nation of Zimbabwe, provides an illuminating case study of the consequences of runaway debt.

Zimbabwe’s 12 million inhabitants have experienced some of the worst currency inflation in history. By one estimate, over the last decade, Zimbabwean currency was devalued (i.e. lost its value) by 89 sextillion percent. (One sextillion is a billion trillion or 1,000,000,000,000,000,000,000!)

Defaulting on the Debt

While inflation of the Zimbabwean dollar had been high for years (approximately 50% in 1998, 1999, and 2000), it wasn’t until 2001 that the crisis began in earnest. In 2001, Zimbabwe defaulted on its loans from the International Monetary Fund, and on top of that, owed more than $4.5 billion to foreign countries, the African Development Bank, European Investment Bank, and the World Bank. The IMF estimated that in 2001, Zimbabwe’s external debt totaled 64% of the nation’s GDP. The country’s credit was ruined, and the government could not get loans elsewhere. Investors around the world were understandably unwilling to risk their money by lending to a nation that had just reneged on billions of dollars in outstanding debt.

Printing Money

Deprived of foreign sources of credit, the government began to simply print large amounts of money to pay for its operations. The money was then sold on the foreign-exchange market for U.S. dollars, and used to pay the country’s loans. This attempt to restore the country’s credit rating flooded the market with vast amounts of Zimbabwe’s currency, devaluing the money held by Zimbabwean citizens.

The government quickly became addicted to printing more and more money in order to pay its internal and external debts. As a result, all the money in circulation was being constantly devalued.

If a new municipal building project was needed, the government of Zimbabwe simply printed more money. With little revenue with which to pay public employees, the government printed new money to pay them every day. The international community quickly caught onto the scheme, but the country’s citizens were trapped.

Zimbabwe  currency


This cycle of hyperinflation destroyed people’s life savings. The economy fell into ruin. A functioning economy became impossible when the value of currency literally dropped by the hour. Long term investments disappeared. Basic goods and services were nowhere to be found. Credit was non-existent.

The pace of inflation was so fast that the value of the Zimbabwean dollar changed by the hour, and by 2008, prices were doubling every 1.3 days. At that rate, a bag of rice that cost $10 on Monday would be $80 by Friday. In July of 2008, the inflation rate was estimated at more than 200 million percent, though many say that number fails to capture the heights to which inflation had soared. Time Magazine reported in July 2008 that a pint of milk cost three billion Zimbabwean dollars, or about 30 U.S. cents. Another estimate by the Institute of Commercial Management claimed that 1.2 trillion Zimbabwean dollars was worth one British pound.

Despite the government’s attempts to rebase the currency by literally lopping off 10 zeros in August 2008 and 12 zeros in February 2009, inflation continued to rocket out of control.

The Death of a Currency

By early 2009, the Zimbabwean dollar was effectively worthless. The government was issuing bills in denominations up to one hundred trillion dollars.

At the end of January, citizens of Zimbabwe were allowed to conduct business in any currency, and on April 12, 2009, the Zimbabwean government gave up on the official currency and suspended its use.

Zimbabwe’s Tragedy

Once one of the most successful countries in Africa, Zimbabwe is now one of the poorest in the world.

With no regard for the future of the country, Zimbabwe’s leaders chose a path of reckless borrowing—and then tried to pay their debts by printing more money. This devastated the economy and precipitated a humanitarian crisis and the death of a currency.

The United States is not Zimbabwe, nor will it ever be. However, as we consider the magnitude of our growing national debt, it is useful to look to the example of a nation that chose to ignore its own national debt for too long and paid a very, very dear price.

Top Ten Inflation Rates in the World In 2008

  1. Zimbabwe 11,200,000.00%
  2. Ethiopia 44.40%
  3. Seychelles 37.00%
  4. Venezuela 30.40%
  5. Mongolia 28.00%
  6. Burma 26.80%
  7. Kenya 26.30%
  8. Iran 25.60%
  9. Ukraine 25.20%
  10. Kyrgyzstan 24.50%

Source: CIA World Factbook, est. 2008