SOAS Research Online

Abstract

Through the 1980s, the Nicaraguan economy showed increasing signs of crisis. By 1984 the economy was in decline (see Table 2.1), in 1985 inflation reached triple digits, and 1988 took the monetary economy into chaos with hyperinflation. Beginning in 1985, the government responded to the accumulating difficulties by introducing demand-depressing measures, though these proved ineffective, perhaps even disfunctional (INIES, nd; chapter III). In early 1988 the Sandinista government introduced a draconian package of fiscal and monetary reforms, accompanied by the issuance of a new currency unit in February, in which 1000 old córdobas exchanged for one new. Still the crisis of the monetary economy worsened, indicated by a rate of inflation that year of over 30000 per cent, accompanied by a devaluing of the official exchange rate from 80 new córdobas to the dollar to 7000 in the space of a year (February 1988 to February 1989)1