An analysis of the foreign currency crisis in Zimbabwe (1997-2008)

Abstract

This study was undertaken to analyse the main causes of the prolonged foreign currency crisis in Zimbabwe. The paper begins with an analysis of the historical trends to the crisis and also explores its economic repercussions. Causes of the Zimbabwean currency crisis identified in the research include the rigidity of the exchange rate, political instability, failure of the financial system, lack of international balance of payments support, corruption, lack of manufactured exports and a significant decline in traditional exports . The adoption of a flexible exchange rate management system, value addition to exports, re-engagement of the international community and the general economic revival initiatives are some of the possible solutions to the current foreign currency turmoil.