Hyperinflation in Developing Countries

Submitted By;
Afzal Naqash
BBA (Hons) 02103125

University Of Lahore
Raiwind Road Lahore

Hyperinflation
Introduction:
In economics, hyperinflation occurs when a country experiences very high and usually
accelerating rates of inflation, rapidly eroding the real value of the local currency and causing the
population to minimize their holdings of the local money. The population normally switches to
holding relatively stable foreign currencies. Under such conditions the general price level within
an economy increases rapidly as the official currency quickly loses real value.

Hyperinflation In Developing Countries

Here we explain some developing countries and also see hyperinflation in future in these:

Pakistan:
A hyperinflation is mainly caused when there is excessive, drastic growth in the supply of
paper money. As the destruction of currency reaches its peak, hyperinflation happens. In Pakistan
monetary and fiscal authorities are regularly issuing large quantities of money to pay for a large
stream of government expenditures thus money in circulation is now much higher than the level
of total output of the economy.
These are the main problems, due to this Pakistan faces hyperinflation today and also in
coming years. It is better for economy like Pakistan to set its performance targets not only in
terms of low inflation rates but also in terms of human development, efficiency, productivity, and
low exchange and interest rates to control the hyperinflation in coming years.

Bangladesh:
The inflation rate in Bangladesh was recorded at 6.60 percent in October of 2014.
Inflation Rate in Bangladesh averaged 6.65 Percent from 1994 until 2014, reaching an all time
high of 12.71 Percent in December of 1998 and a record low of -0.02 Percent in December of
1996. Inflation Rate in Bangladesh is reported by the Bangladesh Bureau of Statistics. This

condition shows that the inflation will be so high in coming years thats a horrible condition for
the Bangladesh.

India:
The Indian rupee could crash to 70 against the U.S. dollar in a month or so, Deutsche
Bank said in a report. The ominous forecast comes at a time when the partially convertible rupee
has breached 64 to the dollar to a record low.
We continue to believe that fundamentally the rupee is undervalued and has overshot its
equilibrium level substantially but as numerous episodes of past currency crises have amply
demonstrated, under a scenario of deep pessimism, currencies can overshoot substantially and
remain so for a long time, economists at Deutsche Bank wrote in the report. Thats a bad
condition for India and also leads it toward hyperinflation.

Sri Lanka:
The inflation rate in Sri Lanka was recorded at 8.50 percent in November of 2014.
Inflation Rate in Sri Lanka averaged 15.20 percent from 1986 until 2014, reaching an all time
high of 28.31 percent in June of 2008 and a record low of -0.89 percent in March of 1995.
Inflation Rate in Sri Lanka is reported by the Central Bank of Sri Lanka.

Kenya:

Since Jan 2011 the rate of inflation was about 6% or 7% but all over the past months it is
still on an upward trend evident from the last month's September 2014 rate being 17.1% and it is
believed that if something is not done this upward trend will continue in that very fast mode.

Zimbabwe:
Daily inflation rate: 98 per cent
Prices doubled every: 25 hours
Zimbabwes hyperinflation was preceded by a long, grinding decline in economic output
that followed Robert Mugabes land reforms, through which land was expropriated largely from
white farmers and redistributed to the majority black populace. This led to a 50 per cent collapse
in output over the next nine years.
Socialist reforms and a costly involvement in Congos civil war led to outsized
government budget deficits. At the same time, the Zimbabwean population was declining as
people fled the country. These two opposing factors of increased government spending and a
decreasing tax base caused the government to resort to monetization of its fiscal deficit.

Peru:
Daily inflation rate: 5 per cent
Prices doubled every: 13 days, 2 hours
Peru had a long battle with inflation in the latter half of the 20th century. During the first
half of the 1980s, Fernando Belinda Terry was president, and Peru was faced with austerity
policies imposed by IMF lenders following the Latin American financial crisis that began early
in the decade.
This led to the election of Alan Garcia in 1985 as president. Garcia enacted populist
economic reforms that only served to weaken the economy and shut Peru out of international

credit markets. Faced with a lack of access to credit and deteriorating economic conditions,
sustained high inflation became hyperinflation in Peru.