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Zaire Inflation
Zaire often financed its large budget deficits by
borrowing
from the domestic banking sector. This process in turn led
to
excessive growth in the money supply and rapid inflation.
The black
market, persistent government overspending, and a lack of
control
of the money supply led to high rates of inflation, rising
to 77
percent in 1983 according to the central bank. A key
objective of
the stabilization program of 1983 was to control the
growth of the
money supply and inflation by gradually instituting
measures
designed to restrict credit expansion. During the 1983-86
period,
these measures resulted in a sharp decrease in domestic
liquidity
and a lower inflation rate--52 percent in 1984, 24 percent
in 1985,
and 47 percent in 1986. Commercial bank deposit rates
increased.
Pressure on the exchange rate diminished.
In 1987 and 1988, however, after the 1983 plan
unraveled, the
rate of inflation soared to 90 percent and 83 percent,
respectively, as the money supply exploded. The zaire
dropped
dramatically against the dollar and against the pound
sterling. In
January 1989, the government tried again to contain the
budget
deficit and to limit monetary financing of the deficit. By
April
1989, domestic liquidity had declined, real interest rates
were
positive, and inflation was briefly lowered. As was the
case with
previous reforms, however, the economic gains from this
plan were
short-lived, and the inflation rate for 1989 rose to 104
percent.
In 1990 inflation was conservatively reported by the IMF
to have
dropped to 81 percent. (Other sources reported a 296
percent rate
in 1990.) But the rate rose dramatically to 2,154 percent
in 1991
(3,524 percent according to other sources). By 1992 and
continuing
throughout 1993, the economy had deteriorated to such an
extent
that, although no reliable figures had been produced by
the
government, inflation was wildly estimated at rates
ranging between
3,500 and 23,000 percent. Some sources cited an average
rate of
4,129.2 percent in 1992.
In late 1993, analysts noted that the rate of
inflation,
although still very high and rising, had not accelerated
as much as
expected despite the drastic decline in the value of the
zaire.
They attributed this situation to the severe reduction in
imports
and the virtual demonetization of the economy. Some
believed that
the average annual inflation rate for 1993 would prove to
be in the
neighborhood of 275 percent rather than the 7,000 percent
to 10,000
percent originally predicted.
Data as of December 1993
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