Zimbabwe - Money

Before 1994, the value of the Zimbabwe dollar was determined by the Reserve Bank of Zimbabwe (RBZ) on the basis of a trade-weighted basket of foreign currencies. Although there were large devaluations in 1982, 1991, and 1993, high domestic inflation frequently caused monthly adjustments of 1 to 2 percent. As part of the 1990 Enhanced Structural Adjustment Program (ESAP), the Zimbabwe dollar was floated, allowing companies to retain export earnings in foreign currencies, and restrictions were removed on holding the currency abroad and on investing on the Zimbabwe stock exchange. However, the RBZ reserves the right to intervene in the foreign exchange market (buying the Zimbabwe dollar when its price begins to fall, and selling when its price rises) to maintain a stable exchange rate . However, the price of the Zimbabwe dollar has been subject to a falling trend, and the RBZ has been unable to stabilize the exchange rate because it has lacked the foreign exchange to make purchases. The Zimbabwe dollar has lost considerable ground against the U.S. dollar since independence, depreciating from an average rate of Z$0.64=US$1 in 1980 to Z$38.15=US$1 in 1999. This depreciation has worsened since November 1997, owing to economic and political instability that prompted a run on the currency, depreciating it to Z$55.05=US$1 by mid-2001.

User Contributions:

Comment about this article, ask questions, or add new information about this topic: