01-10
AN ANALYSIS OF HYPERINFLATION IN ZIMBABWE
Authors: ARPIT JAIN, SNIGDHA BHANDARI & ALOK KUSHWAH
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This paper carries out an in depth analysis of the severe hyperinflation crisis in Zimbabwe: reasons for the onset
of the crisis, present state of affairs in the country and finally, the road ahead. The major political and economic reasons
leading to hyperinflation have been discussed: gradually growing fiscal deficit ascribed mainly to unbudgeted government
expenditure, political unrest, participation in wars, and heedless land redistribution reforms. Further, we have examined the
effect of hyperinflation on Zimbabwe’s economic institutions and markets, conceived as a rapid increase in price levels of
commodities and depreciation of local currency. As a result of hyperinflation, the society has encountered growing
unemployment, increased emigration and decreased life expectancy. We hence analyze various policy and structural
changes that have been made by the government and the merits and demerits of the latter. Considering the lackadaisical
attitude of Reserve Bank of Zimbabwe and the ever growing black market, a complete change in the monetary system for
Zimbabwe has been suggested. The benefits of dollarization and how it has enriched the economy, bringing about a large
improvement in GDP and growing stability in prices has been discussed in detail. However, long term improvement can
only be addressed by stringent policy changes directed at tackling flaws in the political and economic system like lack of
infrastructure, corruption, black markets and much more.