Peta Thornycroft has a good post on her Telegraph blog today about the price of milk in Zimbabwe. Her post gives an insight into inflation, depreciation and government insanity in one simple illustration:
[...] She told anyone prepared to listen, that a 2 litre bottle of milk cost Z$10 000 on Tuesday, but 24 hours later it was Z$17 000. Someone paying for milk at the next till snapped: "There wasnâ€™t any milk yesterday."
If you translate that to 'real money' (as opposed to our pretend-pretend bearer cheque money), the Zimbabwe dollar's fast depreciation can be explained in this way:
In the morning the new price of milk would have been about Â£1. Later in the day it would have been down to about 98 pence.
But now factor in government insanity: the Reserve Bank's official exchange rate pulled out of thin air by the Zanu PF government actually means this:
Legally that milk would cost about Â£36 [...] as the official rate of exchange is US$250 to one Zimbabwe dollar.
When you think of it in terms of milk, it's hardly surprising that financial institutions like the IMF are unimpressed with Zimbabwe's economic policies. The recent criticism of Zimbabwean policies by the IMF provoked outrage from Robert Mugabe (no surprise there) and gave rise to one of my favourite headlines so far this year - Mugabe savages IMF, bites Pretoria (from IOL).
Mugabe apparently attacked the IMF as "nonsense" among many other tired familiar rants. I'd have to say though that I can't think of many things as utterly nonsensical as paying Â£36 for 2 litres of milk!
[tags]Zimbabwe, inflation, depreciation, economy, Mugabe, IMF, exchange rate, forex[/tags]