Evolution of Zimbabwe’s economic tragedy: a chronological review of macroeconomic policies and transition to the economic crisis

This paper chronicles Zimbabwe’s macroeconomic policies and economic development trends from the post independence period up to end of 2006. By focussing on monetary and exchange rate policies and their influence on economic developments before and after the reform programme in 1991, the paper attempts to reveal the critical macroeconomic policy underpinnings of Zimbabwe’s post-2000 economic tragedy. A key insight from the review is that despite what seemed to be concerted economic management efforts, the authorities actually never succeeded in attaining sustainable economic stabilization goals from the very start of the post-independence era. The constraints imposed by the inward looking policies of the 1980s and the eventual failure of ‘free market’ exchange rate policies of the early 1990s resulted in chronic real exchange rate overvaluation and depletion of foreign exchange reserves. This eventually culminated in the so-called “Black Friday” currency crash, and a severe foreign exchange crisis that has since been viewed as one of the most important factors that led to the economic tragedy. Hence in retrospect, the review concludes that the post-independence government in Zimbabwe never succeeded in bringing the economy into long term structural equilibrium and, thus failed to create an enabling environment for medium to long term macroeconomic policy sustainability.