November 9, 2012 3:38PM # Zimbabwe’s Four-Year Anniversary—From Hyperinflation to Growth By [Steve H. Hanke](https://www.cato.org/people/steve-h-hanke) --- SHARE In mid-November 2008, Zimbabwe recorded the [world’s second-highest hyperinflation](https://www.cato.org/publications/working-paper/world-hyperinflations). Today, it can boast strong growth and single-digit inflation rates. In 2008, Zimbabwe’s annual real GDP growth rate was a miserable ‑17.6 percent and its annual inflation rate was 89.7 *sextillion* percent—that’s roughly 9 followed by 22 zeros. So how did Zimbabwe go from economic ruin to an annual GDP growth rate of 9.32 percent in 2011, with [estimates of relatively strong growth rates through 2013](http://www.bloomberg.com/news/2011-07-26/zimbabwe-economy-on-course-to-grow-9-3-percent-this-year-biti-forecasts.html)? As I predicted in early 2008, the answer is simple: spontaneous dollarization brought an [end to the horrors of hyperinflation](https://www.cato.org/publications/development-policy-analysis/zimbabwe-hyperinflation-growth). In late 2008, the people of Zimbabwe spontaneously dollarized the economy. Thiers’ Law prevailed: good money drove out bad, and the government’s hands were tied. Indeed, the government was forced to officially dollarize in 2009. Since then, Zimbabwe has enjoyed positive GDP growth rates, a feat not accomplished since 2001 (see accompanying chart). ![Media Name: Zim-GDP-Growth.png](/sites/cato.org/files/styles/pubs_2x/public/wp-content/uploads/Zim-GDP-Growth.png?itok=agkN0sU3) While these achievements are cause for celebration, there are still problems in paradise: Robert Mugabe continues to hold the reins of power; Zimbabwe’s[ “Ease of Doing Business” ranking](http://www.doingbusiness.org/rankings) is a dismal 172nd out of 185; and “change” is, in short, [hard to come by](http://www.nytimes.com/2012/04/25/world/africa/using-us-dollars-zimbabwe-finds-a-problem-no-change.html?pagewanted=all). In addition, the government’s[ external debt is now close to $12.5 billion](http://blogs.ft.com/beyond-brics/2012/11/01/zimbabwe-a-tentative-t-bill-step/#axzz2BkPQFFCW) and lending rates between [Zimbabwe’s embattled banks](http://blogs.ft.com/beyond-brics/2012/09/14/zimbabwe-1bn-bailout-bet-baffles-harare-bankers/#axzz2BkPQFFCW) are as high as 25 percent. To top it off, the Zimbabwean government is attempting to [force banks to buy its treasury bills](http://www.bloomberg.com/news/2012-11-08/zimbabwe-to-force-banks-to-buy-debt-after-auction-flopped.html) at significantly discounted rates, after its debt auction flopped in early October. Talk about ruling with an iron fist. If this isn’t bad enough, Zimbabwe’s official statistics have produced a very low signal-to-noise ratio—one that, quite frankly, leaves one listening to static. Both the quantity and quality of official data, ranging from [migration statistics](http://www.imf.org/external/pubs/ft/dp/2010/afr1003.pdf) to [trade figures](http://siteresources.worldbank.org/INTRANETTRADE/Resources/239054-1239120299171/5998577-1254498644362/6461208-1300202947570/Zimbabwe_Trade_Diagnostic.pdf), are in short supply, particularly data from the period of [Zimbabwe’s 2007-08 hyperinflation](https://www.cato.org/zimbabwe). None of this comes to a surprise to me. After all, as far as Zimbabwean officials are concerned, the country’s hyperinflation peaked in July 2008, with a monthly inflation rate of 2,600 percent. After this point, Zimbabwe stopped collecting and reporting data on price changes, throwing a shroud of secrecy over the country’s hyperinflation disaster. In reality, hyperinflation continued after July 2008, growing at an exponential rate until mid-November 2008. Alex Kwok and I lifted the shroud on this hyperinflation in our 2009 *Cato Journal* article. We determined that Zimbabwe’s hyperinflation actually peaked in mid-November 2008, with a monthly rate over [30 million times higher than the final inflation rate reported by the government](https://www.cato.org/pubs/journal/cj29n2/cj29n2-8.pdf). In an attempt to correct the government’s lying statistics, I have contacted high officials in Zimbabwe via telephone and email. But, I have been stonewalled, given a bureaucratic runaround. The last thing the Mugabe government seems to be interested in is an accurate account of the world’s second-highest hyperinflation. Lying statistics remain the order of the day. ##### Related Tags [Inflation](https://www.cato.org/inflation) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).