The Hyperinflation in Zaire from the 1988 to 1997

The Hyperinflation in Zaire from the 1988 to 1997

The hyperinflation in Zaire (now the Democratic Republic of the Congo) from the late 1980’s through the 1990’s was very serious but by no means was in the class of the most extreme hyperinflations such as that in Yugoslavia in the 1990’s or in Hungary after World War II. Zaire’s inflation was more like the chronic inflations which used to occur in Latin America where the rate of inflation was a few hundreds of percent year after year for decades. In Zaire’s case the rate of inflation was a few thousands of percent during the early 1990’s then peaked at about 24 thousand percent in 1993-1994. Thereafter the rate dropped to a level of a few hundreds of percent. In Zaire’s case a factor limiting the inflation of the money supply was the fact that it finally could not come up with hard currency payments to the company printing up the bank notes.

Here is the statistical record of inflation in Zaire from the International Monetary Fund financial statistics reports:

Rates of Inflation in Zaire, 1988 to 1997
Year	Rate of Inflation
1988	80%
1989	104%
1990	82%
1991	2254%
1992	4130%
1993	1987%
1994	23773%
1995	542%
1996	659%
1997	176%

From 1987 when the IMF price level series began to 1997 the price level increased by a factor of 4.25 billion. That which cost 1.0 New Zaire in 1987 cost 4.25 billion New Zaires in 1997.

Up until 1980 the income velocity of money in Zaire was in the range of 3 to 5 times per year. In 1980 the velocity jumped to 13 times per year and stayed in the range of 9 to 15 times per year during the 1980’s. However during the accelerated inflation of the early 1990’s the velocity actually dropped back to 6 to 7 times per year.

Source: IMF Financial Statistics
N.A.= Not Available

Money and GDP in Zaire, 1970 to 1995
year	GDP (billions New Zaires/yr)	Money Supply (billions New Zaires)	Income Velocity (per year)
1970	0.313	0.069	4.5
1971	0.350	0.075	4.7
1972	0.386	0.091	4.3
1973	0.492	0.125	3.9
1974	0.599	0.166	3.6
1975	0.639	0.183	3.5
1976	0.953	0.253	3.8
1977	1.319	0.403	3.3
1978	1.827	0.621	2.9
1979	3.703	0.652	5.7
1980	13.333	1.061	12.6
1981	18.333	1.613	11.4
1982	26.167	2.821	9.3
1983	47.267	3.422	13.8
1984	94.600	6.261	15.1
1985	119.600	8.112	14.7
1986	160.867	12.890	12.5
1987	287.000	25.246	11.4
1988	552.000	58.000	9.5
1989	1147.000	98.000	12.1
1990	2239.000	289.000	7.8
1991	47208.000	7182.000	6.6
1992	1765000.000	280000.000	6.3
1993	26924000.000	8260000.000	3.3
1994	N.A.	584000000.000	N.A.
1995	40095000000000.000	2672000000.000	15.0

The devastating statistics for Zaire during the period 1970 to 1995 were the levels of real GDP and real percapita GDP. In 1974 the value of Zaire’s GDP in 1990 prices peaked at 2.954 billion New Zaires. Thereafter it fell to a level of 1.485 billion 1990 value New Zaires. There were some years in which the level increased but the trend was definitely and inexorably downward. In percapita terms the record was even worse. In 1974 the percapita GDP in 1990 level prices was 123.5 New Zaires; in 1997 it was 32.7 New Zaires. The most precipitous decline came during the accelerated inflation of the early 1990’s. However the situation reflected a collapse of the formal economy. The growth of the informal, underground, back-market economy sustained the population and grew to be several times larger than the formal economy reflected in the GDP statistics.

Source: IMF Financial Statistics

Real GDP, Population and GDP percapita in Zaire, 1970-1995
Year	Real GDP 1990 Prices (millions New Zaires)	Population (millions)	Percapita GDP 1990 New Zaires
1970	2520	21.64	116.45
1971	2672	22.22	120.25
1972	2676	22.86	117.06
1973	2893	23.51	123.05
1974	2984	24.71	120.76
1975	2833	22.58	125.46
1976	2685	23.29	115.29
1977	2705	24.02	112.61
1978	2561	24.78	103.35
1979	2567	25.56	100.43
1980	1992	26.38	75.51
1981	2011	27.23	73.85
1982	2002	28.12	71.19
1983	2029	29.04	69.87
1984	2129	29.92	71.16
1985	2153	30.98	69.50
1986	2255	31.50	71.59
1987	2314	32.46	71.29
1988	2328	33.46	69.58
1989	2295	34.49	66.54
1990	2239	35.56	62.96
1991	1964	36.67	53.56
1992	1759	40.57	43.36
1993	1521	42.28	35.97
1994	1462	43.93	33.28
1995	1485	45.45	32.67

(To be continued.)

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