The government of Zimbabwe announced this week that they were finally demonetizing the Zimbabwe Dollar. Although the United States Dollar replaced the Zimbabwe Dollar in every day transactions back in 2009, banks still carried accounts that were denominated in Zimbabwe Dollars. Beginning on June 15, 2015, for only 35 quadrillion (35,000,000,000,000,000) Zimbabwe Dollars bank customers will receive one free portrait of George Washington. This opportunity expires in September.
Believe it or not, Zimbabwe will not get in the Guinness Book of World Records for the most insane currency conversion. Hungary holds this dubious record because 400,000 quadrillion pengo were required to obtain one forint back in 1946 when Hungary went through its own currency conversion.
Currently, the United States Dollars and South African Rand are used in Zimbabwe for everyday transactions. These two currencies are legal tender in Zimbabwe along with Australian Dollars, the British Pound, the Botswana Pula, Chinese Yuan, Indian Rupees and Japanese Yen. The Zimbabwe Dollar is now officially dead.
The country’s currency was originally the Rhodesia Pound which was introduced at par with the British Pound Sterling. The Rhodesia Dollar (RHD) replaced the Rhodesia Pound on February 17, 1970 with 2 Rhodesia Dollars equal to 1 Rhodesia Pound. The Zimbabwe Dollar in turn replaced the Rhodesia Dollar at par on April 18, 1980. When this conversion occurred, a Zimbabwe Dollar was valued at 1.47 United States Dollars, but because Zimbabwe had higher inflation than the United States, the Zimbabwe Dollar steadily depreciated against the U.S. Dollar.
The inflation rate in Zimbabwe averaged around 10% in the 1980s, around 20% to 30% between 1990 and 1997, and 50% between 1998 and 2000. In 2001, the inflation rate exceeded 100%, and in 2003 it was almost 600%. At that point, hyperinflation kicked in. Inflation rose to 1281% in 2006, and 66,000% in 2007. In 2008, the money supply grew by 658 billion percent and inflation hit an annualized 80 billion trillion percent (89,700,000,000,000,000,000,000) toward the end of 2008. At that point, Zimbabwe Dollars were about as valuable as toilet paper.
Other problems occurred. People found it difficult to take money out of ATM machines because the ATMs couldn’t handle values in billions and trillions. Customers received a “data overflow error” and weren’t able to withdraw anything. By the time the ATM machines were fixed and the ATMs allowed customers to withdraw Z$100 billion per day, that amount wasn’t enough to cover the cost of a loaf of bread. If a customer wrote a check to purchase something, they were required to write the check for twice the cash price of the item to cover the impact of inflation by the time the check cleared.
During the 2000s, Zimbabwe went through four currencies in four years. On July 31, 2006, Zimbabwe introduced a new Dollar with 1000 old Zimbabwe Dollars (ZWD) equal to 1 Second Zimbabwe Dollar (ZWN). On August 1, 2008, 10 zeroes were removed with 1 Third Zimbabwe Dollar (ZWR) equal to 10 billion Second Zimbabwe Dollars. On February 2, 2009, a Fourth Zimbabwe Dollar (ZWL) was introduced, removing 12 zeroes, with 1 Fourth Zimbabwe Dollar equal to 1 trillion Third Zimbabwe Dollars. Thus 1 Fourth Zimbabwe Dollar was equal to 10 trillion trillion (10,000,000,000,000,000,000,000,000) first Zimbabwe Dollars.
The third Zimbabwe Dollar went through 27 denominations ranging from 1 Dollar to 100 Trillion dollars. Coins issued under the first Zimbabwe Dollar were made legal tender under the Third Zimbabwe Dollar, increasing their value 10 trillion-fold. The machines used to print currency were used continuously, causing them to break down, and creating greater shortages of currency, especially since the Reserve Bank was unable to obtain repair parts for the machines.
The 100 Trillion Dollar note was the highest denomination issued for the third Zimbabwe Dollar. It has become a novelty item which can be obtained from dealers on EBay. Although its face value is less than one penny, the banknotes generally sell for around $30.
The fourth Zimbabwe Dollar died a quick death, only reaching the Z$500 denomination before the currency was cast aside. Foreign currency was effectively legalized as a de facto currency on September 13, 2008, and on January 1, 2009, the Reserve Bank of Zimbabwe allowed U.S. Dollars to circulate freely throughout the country. The Fourth Zimbabwe Dollar remained legal tender until June 30, 2009 by which time it has lost 95% of its value in the five months of its existence. By then, transactions were almost exclusively in U.S. Dollars, the Zimbabwe Dollar having been abandoned.