Zimbabwe's Dollar Experience

choi

Lydia Polgreen, Using US Dollars, Zimbabwe Finds a Problem: No Change. New York Times, Apr 25, 2012.
http://www.nytimes.com/2012/04/2 ... blem-no-change.html

Quote:

(a) For years, Zimbabwe was in hyperinflation. "But since Zimbabwe started using the United States dollar as its currency in 2009, it has run into a surprising quandary. * * * Zimbabweans call it 'the coin problem.' Simply put, the country hardly has any. Coins are heavy, making them expensive to ship here. But in a nation where millions of people live on a dollar or two a day, trying to get every transaction to add up to a whole dollar has proved a national headache.

"Still, the new predicament is an improvement. By virtually wiping out inflation, analysts say, use of the United States dollar saved Zimbabwe from total economic collapse

(b) "According to the United States Federal Reserve, at least five countries have officially adopted the United States dollar as their currency. Several more, like Zimbabwe, use it almost exclusively but hold on to a national currency, even if it is not in circulation.

"But United States coins seldom circulate more than 100 miles beyond the country’s borders because of their weight and high shipping costs.

"Most countries that use the dollar get around this problem by minting local coins: Ecuador uses the dollar as legal tender but mints centavo coins. The government guarantees that anyone who wants to exchange 100 Ecuadorean centavos for a genuine United States dollar can do so.

"But that requires confidence in the local government, something that is in even shorter supply here than coins. Zimbabweans say they want no legal tender issued by their government.

My comment:
(a) I am always curious how Chinese Communists cured the hyperinflation when they took over in 1949. I have found almost noting in English-language Web.
(b) Ecuador was the first Latin American nation to implement dollarization, in 2000--again to tame hyperinlfation. I just checked, and it also has the coin problem. See

Jess Jiang, Ecuador Needs Your Dollar Coins. Planet Money, NPR, June 29, 2011.
http://www.npr.org/blogs/money/2 ... s-your-dollar-coins