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 tÍÍÍÍo 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