November 14, marks the 21st anniversary of “Black Friday”, the day the Zimbabwe dollar crashed in 1997.
Here is how the Zimbabwe dollar collapsed from that fateful November day, and the many desperate policies enacted over the past two decades to try and end the crises that followed.
1997 – War veterans hold a series of protests against President Robert Mugabe, pressing for gratuities and pensions. The protests include a march on State House and heckling and booing Mugabe during his Heroes Day speech in August.
War veterans’ leader Chenjerai Hunzvi led protests to pressure Mugabe to pay gratuities.
Mugabe buckles, and orders Finance Minister Herbert Murerwa to dole out ZW$50 000 each to over 50 000 war veterans. The total bill of the payouts and the pensions would be ZW$4.2 billion, or over US$300 million at the time. It is 3 percent of GDP then.
None of it is in the budget. When Herbert Murerwa tells Mugabe that the spending will bankrupt the economy, the President shoots back: “Who ever heard of a country going bankrupt?”
Separately, the government has announced its intention to list more than 1 400 farms, many of them productive, for redistribution to landless blacks. It is reported that the IMF and other donors have threatened to pull out.
Rumours spread that foreign reserves are down to just a month’s worth of imports. Speculators, panicked by the flurry of bad news, start stocking up on US dollars. Desperate, the government injects US$15 million to try and prop up the Zimdollar. But the pressure is unrelenting.
Late on Friday, November 14, the Zimbabwe dollar plunges 72 percent. The stock market crashes 46 percent. That same day, by coincidence, there is a national blackout. The day comes to be known as “Black Friday”.
In the aftermath, the government orders companies to shut down their foreign currency accounts, hoping that the flow of US dollars into the market will put brakes on the Zimdollar’s slide. But it has the opposite effect; confidence collapses even further, as does the stock market and the Zimdollar itself.
Investors head for the exits. McDonalds, the US fast food giant, abandons plans to open its first outlet in Zimbabwe.
That December, a proposal to raise a new tax to fund the payouts is withdrawn after labour unions hold street protests.
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