Zimbabwe’s currency ‘curse’ and the economic malaise

The document analyses Zimbabwe's history of currency instability, from the failure of the US dollar peg and subsequent hyperinflation to the period of full dollarisation (200919) and the 2019 reintroduction of the Zimbabwean dollar. It argues that currency choice is secondary to macroeconomic fundamentals, noting that budget deficits and money creation have consistently undermined stability. The author suggests that if the new Zimbabwean dollar cannot be stabilised, the country should consider adopting the South African rand and joining the Common Monetary Area (CMA) to improve trade integration and competitiveness.

• Zimbabwe underwent a period of full dollarisation between 2009 and 2019, which followed the collapse of the Zimbabwean dollar and a period of hyperinflation.
• The reintroduction of the Zimbabwean dollar in June 2019 was intended to address the economic crisis and manage foreign currency supply and demand, but the currency has since depreciated rapidly on both official and parallel markets.
• There is no recent historical precedent for a country that abandoned its currency due to instability, became dollarised, and then successfully re-introduced a domestic currency.
• Zimbabwe's balance of payments is constrained by a substantial current account deficit, a lack of foreign direct investment due to high risk, and no access to international capital markets because of debt arrears.
• The author argues that the South African rand would be a more appropriate foreign currency for Zimbabwe than the US dollar because it aligns with Zimbabwe's trade patterns and would avoid the competitiveness issues associated with the US dollar.
• Adopting the South African rand would require the agreement of the South African government and likely the other members of the Common Monetary Area (Lesotho, Namibia, and eSwatini), as well as a loan to recapitalise the monetary base.
• The document concludes that the choice of currency regime is irrelevant if economic fundamentals are flawed; large budget deficits financed by printing money inevitably lead to inflation and depreciation.

APA

Jefferis, K. (2020). Zimbabwe’s currency ‘curse’ and the economic malaise. Institute for Security Studies. https://issafrica.s3.amazonaws.com/site/uploads/pb140.pdf

Chicago

Jefferis, Keith. Zimbabwe’s currency ‘curse’ and the economic malaise. Institute for Security Studies, 2020. https://issafrica.s3.amazonaws.com/site/uploads/pb140.pdf.

Wikipedia

{{cite report |last1=Jefferis |first1=Keith |title=Zimbabwe’s currency ‘curse’ and the economic malaise |publisher=Institute for Security Studies |date=2020 |url=https://issafrica.s3.amazonaws.com/site/uploads/pb140.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{jefferis2020zimbabwes, author = {Jefferis, Keith}, title = {{Zimbabwe’s currency ‘curse’ and the economic malaise}}, institution = {Institute for Security Studies}, year = {2020}, url = {https://issafrica.s3.amazonaws.com/site/uploads/pb140.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }