The Hyperinflation Debate Hits Zimbabwe As Economics Professors Clash

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The hyperinflation debate has reappeared in Zimbabwe as two top economists give different views of the situation in the country.

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Government adviser and economist Professor Ashok Chakravarti said that the economy is not receding back to the hyperinflation era whilst the Johns Hopkins University Professor Steve Hanke says Zimbabwe is experiencing hyperinflation again today.

 

“As I previously predicted, the New Zim dollar (Bond Note) is rapidly becoming worthless, and with that, hyperinflation has yet again reared its ugly head”, Hank said contributing to Forbes.

Chakravarti on the other hand said, “We are not heading towards hyperinflation, as some people are saying, that is not going to happen because we have much more better policies at the moment.”

Hank argues that in 2013, government spending and public debt surged, resulting in economic instability.

“To finance its deficits, the government created a ‘New Zim dollar.’ The New Zim dollar is issued at par to the U.S. dollar, but trades at a significant discount to the U.S. dollar”, Johns Hopkins Professor said.

“The money supply, as a result of the issuance of the New Zim dollar, exploded in Zimbabwe, and so has inflation”.

The Reserve Bank of Zimbabwe (RBZ) issued Bond Notes last year the easy the financial shortage.

Chakravarti, on the other hand, said there is a fundamental difference between what is happening today and what happened in 2008 according to Ebusinessweekly.

“The situation in 2008 was that the RBZ was indiscipline and printing money indiscriminately. And this resulted in hyperinflation”, said Chakravarti in Ebusinessweekly.

“When you have a situation of unrestrained printing of money you then get hyperinflation… this is a very common economic phenomenon”.

There are already fears of the coming back of the 2008 hyperinflation which can be proved through the alarmed buying that recently happened in the country.

In 2008 Zimbabwe experienced a hyperinflation after the Bearer Cheques, which were being issued by the then Governor Dr Gideon Gono lost value. The US Dollar came in and rescued the situation in 2009 with commodities reappearing in retail outlets again.

 

 

 

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