Zimbabweans use eggs to calculate exchange rate

Dec 19, 2007, 9:39 GMT

Harare/Johannesburg - Fed up with myriad official and unofficial rates for hard currency, some Zimbabweans have started using eggs to calculate the rate of exchange.

President Robert Mugabe's government has set the official rate of exchange at 30,000 Zimbabwe dollars to the US dollar. But hardly anyone uses that rate these days.

Despite threats from the feared National Incomes and Pricing Commission (NIPC), shops, private tutors, street vendors and cross- border traders all use parallel exchange rates to set their prices.

The problem is that as the annual inflation rate rises - currently it's running at more than 14,000 per cent - black market exchange rates change all the time. And everyone wants to get the best deal.

So some locals have adopted the Hard-Boiled Egg Index (HBEI) to determine what they are calling a fair value exchange rate. The HBEI, popularized by a local financial columnist, works on the premise that across Africa, 1 US dollar buys around eight eggs.

To work out a fair exchange rate for the US dollar on a particular day, Zimbabweans take the cost of buying just one egg - usually from a roadside vendor because shops are poorly stocked - and multiply by eight.

On Tuesday, for example, an egg cost 300,000 or 400,000 Zimbabwe dollars, depending on where you were shopping.

Multiply by eight and you get totals of 2.4 million and 3.2 million. Work out the median, and the fair value HBEI rate for the US dollar is 2.8 million Zimbabwe dollars.

'Sometimes the parallel rate gets ahead of the HBEI and sometimes it lags behind,' a local financial news service said Wednesday.

'Generally the HBEI reflects exchange rate inflation, purchasing power parity and domestic inflation in a very effective way.'