Macroeconomic Policies and Transition to the Economic Crisis in Zimbabwe

Abstract

This paper presents an account of Zimbabwe’s economic development and policy environment for the period 1980-2006. It focuses on monetary and exchange rate policies and explores their influence on economic developments before and after the reform programme that was launched in 1991. A key insight of the analysis is that despite concerted economic management efforts, the country never succeeded in attaining sustainable post-independence economic goals. The constraints imposed by the inward looking policies of the 1980s and the failure of exchange rate policies resulted in chronic real exchange rate overvaluation. This culminated in a currency crisis that seriously undermined the market reforms, and has been widely viewed as one of the most important factors leading to the macroeconomic crisis of the late 1990s.