Challenges in the Era of Globalization - iaabd

Proceedings of the 12th Annual Conference © 2011 IAABD
• Full dollarization can improve the global economy by allowing for easier integration of
economies into the world’s market.
Economic Conditions leading to Dollarization
Zimbabwe has a population of about 13 million people of which 37% is urban population and 73 % is
rural. Between 2000 and 2008 the economy continued to slide down as depicted in table 1 below.
Zimbabwe Gross Domestic Product –real growth rate
YEAR GDP-growth rate Percent
2003 -12.10
2004 -13.60
2005 -8.20
2006 -7.70
2007 -4.40
2008 -5.50
2009 -14.10
2010 -1.30
Table 1 (World Fact book 2010)
Year 2009 marked the dollarization of the Zimbabwe economy under the Government of National Unity
(GPU) that was formed February 13, 2009. With the dollarization of the economy GDP for 2009
improved to minus 1.3% from an estimated minus 14.4% in 2008; the estimation for 2010 was 4.1%. The
dollarization of the economy became necessary to facilitate trade because the Zimbabwe dollar had
become valueless as indicated in Table 2 below.
Exchange rate History of the Zimbabwean Dollars to one US Dollar
Month ZWD Rate per USD
Sept 2008 1 000
Oct 2008 90 000
Nov 2008 1 200 000
Mid Dec 2008 60 000 000
End Dec 2008 2 000 000 000
Mid Jan 2009 1 000 000 000 000
2 Feb 2009 300 000 000 000 000
Table 2 (World Fact book 2010)
It is interesting to note that in the era of Globalization Zimbabwe’s economy had come to a stand- still.
However, the dollarization of the economy has been received with mixed feelings especially by the 94%
of the population that is not gainfully employed especially the rural people where about 80% of the
population is found and are not earning the dollar. Inevitably, the rural people and some of the
unemployed urban people have resorted to barter system to survive in the era of dollarization.
The dollarization of the currency benefited the gainfully employed people and left the majority of the
population with no source of income. As of 2009 Zimbabwe unemployment rate stood at 94%. Given the
high unemployment rate it means that even some of the urban population is unemployed. Faced with that
kind of hardships the majority of the people reverted to barter system. In the short-run the majority of
the Zimbabwe people suffered as they failed to pay for such services as health since they had to have the
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