Zimbabwe freed its economy from the nightmare of hyperinflation by dumping its currency and adopting mainly the U.S. dollar. Six years on the economy is back in crisis.
Bloomberg
Deflation is hindering spending and investment, factories are closing and the government is struggling to find money to pay its workers.
The dollar’s appreciation has made imports cheaper, exports more expensive and fueled a cash crunch, said Mark Ellyne, an economics professor at the University of Cape Town. Laws adopted in 2008 that compel foreign- and white-owned companies to sell at least 51 percent of their shares to local black investors have compounded the problem by deterring investment, he said.
“The dollar strength really works against them,” Ellyne, who worked at the International Monetary Fund for 25 years, said by phone. “They’ve made a wrong choice about the currency and they’ve not opened up enough. They should have tried to do a deal with South Africa to use the rand.”
Zimbabwe imported $2.5 billion
