Faced with hyperinflation, Venezuelans prefer the greenback over the bolívar. As a result, I estimate that 80 percent of all transactions in Venezuela take place in U.S. dollars. Since the country has spontaneously “dollarized,” President Nicolás Maduro has begun to seriously consider official dollarization, something I recommended way back in 1995 when I was President Rafael Caldera’s adviser. If only Venezuela had dollarized then, Venezuelans would never have suffered from the plague of hyperinflation.
Zimbabwe, a country that has suffered two episodes of hyperinflation in the past 13 years, holds down the second spot in my rogues’ gallery of inflators. I measure its annual inflation rate at 343 percent per year.
The third spot on “Hanke’s Inflation Dashboard” belongs to Lebanon, a country that entered an episode of hyperinflation in July. At present, I measure Lebanon’s annual inflation rate at 286 percent. While that’s bad news, the good news is that elements in the Lebanese parliament are considering the installation of a currency‐board system. That would require the Lebanese pound, which has lost 75 percent of its value against the greenback this year, to be fully convertible and trade at a fixed exchange rate with the U.S. dollar. The fixed rate would be credible because the pound would be fully backed by dollar reserves.
Such a currency‐board system in Lebanon would end Lebanon’s currency crisis and smash inflation immediately. I know. I designed and assisted in the installation of Bulgaria’s currency board in 1997, when I was President Petar Stoyanov’s chief adviser. When we installed the currency board in July 1997, the annual inflation rate was 1,230 percent. By the end of 1998, it had plunged to 1.6 percent. Its GDP swung from negative 10.1 percent to positive 3.5 percent; its fiscal balance went from negative 12.7 percent to positive 1.0 percent; and its foreign reserves surged from $864 million to $3.1 billion. Also, at the time the currency board was installed, Bulgaria’s debt‐to‐GDP ratio was 147.5 percent, while today it is 18.6 percent, the second lowest in the European Union.