The ultimate solution to hyperinflation? Just cancel your currency.
The government of Zimbabwe announced on Thursday, June 11th that it was demonetizing the Zimbabwean dollar, in effect cancelling the currency by taking all of the currency out of circulation.
The Reserve Bank of Zimbabwe has established June 15th as the date when demonetization of the Zimbabwe dollar begins, running through September 31st. Citizens of Zimbabwe can convert their Zimbabwean dollars into U.S. dollars at specified rates during this three and one half month period. After September 31st, ZW dollars will have no value.
An official notice will be published in the Government Gazette on Friday to give the new law full legal effect.
Details on Zimbabwe currency cancellation
In a press conference on Thursday, RBZ governor John Mangudya explained to journalists that all cash payouts would be exempted from bank charges and government tax, and would be paid out on a “no questions asked” basis.
Keep in mind that Zimbabwe introduced multiple currencies, including the U.S. dollar, South African rand and Botswana pula, in an attempt to combat hyperinflation which reached at least 231,000,000% in 2008. The government stopped using the Zimbabwean dollar back in April 2009, but had not come up with a method to demonetize the currency to date, meaning many Zimbabweans had huge stacks of useless banknotes stored at home or in their bank accounts.
In the demonetization, bank accounts with balances of zero to 175 quadrillion Zimbabwe dollars will be paid 5 U.S. dollars, while accounts more than 175 quadrillion dollars will be paid the equivalent value of 1 U.S. dollar to 35 quadrillion ZW dollars (or 1 U.S. dollar to 35,000 dollars revalued).
“The banking public should visit their banks to establish the balances which were in their accounts. We have interacted with the banks and they still have all the information, which we as the Reserve Bank also authenticated,” Mangudya explained.
Customers who still had Zimbabwe dollars stored at their homes and businesses will receive an exchange rate of 250 trillion to 1 U.S. dollar for the 2008 notes and 250 dollars to 1 U.S. dollar for the 2009 note series.
Cash customers will receive their exact U.S. dollar equivalent of the converted amount from 1 U.S. cent up to 50 U.S. dollars, and where the equivalent exceeds 50 dollars, payment will be made through their bank accounts. Business customers will see their U.S. dollar equivalents as a credit in their bank accounts.