GAVIN KEETON: Dire state of Venezuela’s economy raises red flags for SA
Hyperinflation destroys the value of people’s savings. It is especially devastating for the poor and those with fixed incomes such as pensioners
The announcement that Venezuela will chop five zeroes off its currency was no surprise. Its government had intended removing three zeroes, but accelerating hyperinflation compelled even more drastic action. New banknotes will be issued in August to reflect the new reality. Prices are said to be rising by 3% a day. This means prices double in just more than three weeks. The annualised rate of inflation is 46,000% and the IMF expects it to reach 1-million percent in 2018. There are important warnings for SA from the desperate situation in Venezuela. There have been few cases of such high inflation. The highest recorded hyperinflation was Zimbabwe’s. In July 2008, the Reserve Bank of Zimbabwe reported inflation had reached 231-million percent. It stopped calculating inflation at that point, because the goods whose prices it needed to measure were no longer available. Other countries have experienced inflation of several thousand percent. However, the impact of hyperinflation is so deva...