What Was the Zimbabwe Dollar (ZWD)? (2024)

What Was the Zimbabwe Dollar?

The Zimbabwe dollar (ZWD) was the official currency for the Republic of Zimbabwe from 1980 to 2009.It is famous for undergoing one of the greatest hyperinflations in modern history.

The ZWD is no longer minted or recognized as the official currency of Zimbabwe. The country issued new Zimbabwean dollars with the 2009 currency version (ZWL), effectively removing twelve zeroes from the earlier denominations.

Then, the ZWL experienced rapid devaluation and from that point until 2019 the country relied on several foreign currencies such as the U.S. dollar, euro, and South African rand, among others. In 2019, Zimbabwe re-introduced the ZWL as the RTGS dollar (real-time gross settlement) dollar.

Understanding the Zimbabwe Dollar

The Zimbabwe dollar was made up of 100 cents and was often presented with the symbol $, or sometimes Z$ to distinguish it from other currencies denominated in dollars.

The turbulent history of the ZWD in many ways aligned with the ups and downs the country and its people went through. Once one of the agricultural centers of the region thatproduced large volumes of food for the surrounding areas, Zimbabwe and its financial health experienced significant challenges thathad severe effects on the country’s economy.

For most of the past two decades, the people of Zimbabwe endured widespread famine due to severe droughts. Thisweather challenge, in turn, led to poverty and food shortages in many parts of the nation.

History of the Zimbabwe Dollar

First introduced in 1980, the Zimbabwe dollar replaced the Rhodesian dollar at par. Thisvaluation made it worth more than the U.S. dollar, but that value quickly fell due to hyperinflation. This out-of-control inflation drove the ZWD down, and at one point it was one of the least valuable currencies in the world.

The Zimbabwe dollar was redenominated in 2006, 2008, and again in August of 2009.Nicknamed "Operation Sunrise," the first ZWD revalued at 1000:1 to the second issue of the Zimbabwe dollar in 2006.

The following year the Reserve Bank of Zimbabwe declared inflation illegal and banned the raising of prices. However, inflation still ran at 1,000%.

The second revaluation began in 2008. The government started to allow some retailers to accept foreign currencies as it printed banknotes with higher and higher values to keep up with inflation.

Finally, in 2009, the government announced a third revaluation with1,000,000,000,000 third dollars exchanging for a single fourth issue dollar. Inflation continued to devastate the economy, and the Reserve Bank continued to print more banknotes.

Zimbabwe's Inflation History

Zimbabwe’s inflation problems started well before the official hyperinflation period that began in 2007. In 1998, the African country's annual inflation rate wasrunningat 47%. Except for a slight decrease in 2000, it steadily rose through to the hyperinflation period, the end of which saw the Zimbabwean dollar abandoned in favor of a number of foreign currencies.

Following its independence in 1980, Zimbabwe's government pursued relatively disciplined fiscal policies. This changed once the government decided that the need to shore up its waning political support took precedence over fiscal prudence.

In the latter half of 1997, worries about the government's fiscal position were fueled by a combination of payouts owed to war veterans and the decision to compulsorily acquire (with partial compensation) White-owned commercial farms to redistribute to the landless Black majority. Numerous runs on the currency led to a depreciation of the exchange rate, which caused import prices to rise, sparking the beginning of the country’s inflation woes.

This initialcost-pushinflation was worsened by the government’s decision, in 2000, to follow through with its aforementioned land reform initiative.

This redistribution created such upheaval on the farms that agricultural production fell dramatically in just a few years. In turn, this supply shock pushed prices higher, motivating a newly appointed central bank governor to name inflation as Zimbabwe's number one enemy in 2004.

While successful in decelerating inflation, atighter monetary policyput pressures on both banks and domestic producers, and threatened to completely destabilize the financial system and wider economy.

Zimbabwe's central bank was forced to engage in quasi-fiscal policies to mitigate the destabilizing effects of the tighter monetary policy. In turn, this undid previous anti-inflationary successes by creating ademand-pullstyle of inflation that escalated into hyperinflation beginning in 2007.

This hyperinflation remained active in Zimbabwe until foreign currency became predominant as a medium of exchange.

Death of the Ailing Zimbabwe Dollar

After years of hyperinflation, in 2009 the government of Zimbabwe announced the demonetizationof the ZWD in 2009. This became final in 2015. Demonetization is the process of officially removing the legal status of a currency unit.

Also in 2009, the government legalized the use of foreign currencies and abandoned the use of the ZWD in April.

The Multiple Currency System

The country would gradually transition from the Zimbabwe dollar to the use of multiple currency systemsover the next few years. These currencies included the Botswana pula (BWP), Indian rupee (INR), euro (EUR), U.S. dollar (USD), and South Africanrand(ZAR).At least nine different currencies acted as legal tender in the country.

In 2015, the government announced that those who had bank accounts could exchange 35quadrillion Zimbabwe dollars for 1 USD in those accounts.

Traders in Zimbabwe had their preferences for which currency to accept, but the U.S. dollar was the most widely accepted throughout the country. In late 2016, the government of Zimbabwe also introduced a batch of bond notes as a form of alternative currency, with a bond note having an exchange rate of 1:1 with the U.S. dollar.

The New Zimbabwe RTGS Dollar

In June 2019, the Reserve Bank of Zimbabwe suspended the multiple currency system and replaced it with a new Zimbabwe dollar known as theRTGS dollar. It was based on the success of the 2016 U.S. dollar-linked notes. In 2020, however, the multiple currency system was reinstated.

According toWorld Bank data, Zimbabwe began to get its problems with inflation under control. However, its annual inflation rate rose again. In 2022, it was around 104% (a huge improvement from 2020's 557%). The annual gross domestic product (GDP) growth rate was 8.5% in 2021 (an increase over 2020's -7.8%).

The Bottom Line

The nation of Zimbabwe has had two official currencies and various de facto currencies thus far in the 21st century. Severe hyperinflation from 2007 to 2009 resulted in the abandonment and replacement of the ZWD. The current state currency is the ZWL. However, because of ongoing inflation, foreign currencies continue to stand in as legal tender.