Harare's Sam Nujoma Street

The Economic History of Zimbabwe began with the transition to majority rule in 1980 and Britain's ceremonial granting of independence. The new government under Prime Minister Robert Mugabe promoted socialism, partially relying on international aid. The new regime inherited one of the most structurally developed economies and effective state systems in Africa. In 2000, the government imposed a Fast Track Land Reform Programme to seize white-owned farms which caused the economy to shrink along with mismanagement, corruption and political instability.

Pre-colonial rule

The economic activities of Bantu states in the region largely reflected the resources of the area and the economic traditions of the inhabitants. For example, the economic power of the Rozvi Empire was based on cattle wealth and farming, with significant gold mining. They established trade with Arab traders, in which materials such as gold, copper, and ivory were exchanged for luxury goods.

Under company, British and minority rule

White immigration to the Company realm was initially modest, but intensified during the 1900s and early 1910s, particularly south of the Zambezi. The economic slump in the Cape following the Second Boer War motivated many white South Africans to move to Southern Rhodesia, and from about 1907 the Company's land settlement programme encouraged more immigrants to stay for good. The Southern Rhodesian mining and farming industries advanced considerably during this period; Southern Rhodesia's annual gold output grew in worth from £610,389 in 1901 to £2,526,007 in 1908. The territory first balanced revenue and expenditure in 1912.

Economically, Southern Rhodesia developed an economy that was narrowly based on production of a few primary products, notably, chrome and tobacco. It was therefore vulnerable to the economic cycle. The deep recession of the 1930s gave way to a post-war boom. This boom prompted the immigration of about 200,000 whites between 1945 and 1970, taking the white population up to 307,000. A large number of these immigrants were of British working-class origin, with others coming from the Belgian Congo, Kenya, Tanzania, and later Angola and Mozambique. They established a relatively balanced economy, transforming what was once a primary producer dependent on backwoods farming into an industrial giant which spawned a strong manufacturing sector, iron and steel industries, and modern mining ventures. These economic successes owed little to foreign aid.

The economy of the state of Rhodesia sustained international sanctions for a decade following the declaration of its independence, a resistance which waned as more southern African states declared independence and majority rule as well as the destruction of the Rhodesian Bush War.


Initially the government followed a corporatist model with government management of the economy.

The government propagated a whole range of new economic policies, introducing a minimum wage and virtually eliminating the right to fire workers. Total spending on education nearly tripled (from Z$227.6 million to Z$628.0 million), as did government spending on healthcare (from Z$66.4 million to Z$188.6 million), between 1979 and 1990. Expenditure on public-sector employment rose by 60%, and on the civil service by 12% per annum over the course of the 1980s. Central government expenditure tripled and increased its share from 32.5 percent of Gross Domestic Product (GDP) in 1979 to 44.6% in 1989. Interest rates were artificially capped.

The consequences during this time were rather mixed. Economic inequality within the population decreased and provision of education and healthcare became more widespread. During the 1980s GDP per capita increased by 11.5%. During the same time period the US had a 38% increase in GDP per capita. Thus the relative poverty of the country rose in relation to the United States during this period. There was an exodus of white Zimbabweans, skilled workers during this period.

There were several reasons for middling to low performance of the economy. Protection sustained existing high cost companies, but discouraged exports by raising the costs of inputs to exporters, leading to a critical shortage of the foreign exchange needed to acquire imported technology. Foreign companies were not allowed to remit dividends, and new foreign investment (Foreign Direct Investment (FDI)) was actively discouraged. The need to get permission and licenses for new investment and the dismissal of individual workers imposed heavy time and transaction costs. Repressed interest rates discouraged saving and the state's high propensity to borrow reduced the supply of capital to all but favoured borrowers, and also stoked inflation (Zimbabwe Inflation Rates). The regime did not encourage, and even suppressed, the development of independent new African businesses because of the threat they were thought to offer to Zanu PF's political monopoly.

Public spending skyrocketed, particularly in the areas of civil service employment, spending on social services, drought relief, and subsidies for government owned companies. This in turn generated a chronic budget deficit, a high tax regime, and a rapid increase in public debt – all of which created a drag on the economy. Private investment was crowded out by shortages of credit stemming from the fiscal deficit, high taxes and the shortages of foreign exchange. The overall effects of these constraints favoured existing capital-intensive producers, biasing the economy against areas labour-intensive activities. Compounding the problem, all companies were effectively discouraged from employing new workers because of controls over wages and employment.

This had two politically significant consequences. First, it suppressed the emergence of a genuinely entrepreneurial African business class and reduced the political support of those that did make their way despite these problems. Second, it turned unemployment into a major threat to the legitimacy of the regime, especially in urban areas. In real terms, wages declined over the decade.


By the end of the 1980s there was increasing agreement amongst government elites that new economic policies needed to be implemented for the long-term survival of the regime. The new policy regime designed by the government and its advisers set out to encourage job-creating growth by transferring control over prices from the state to the market, improving access to foreign exchange, reducing administrative controls over investment and employment decisions, and by reducing the fiscal deficit. It had wide local support and was introduced before economic problems had gone out of control. A 40 percent devaluation of the Zimbabwean dollar was allowed to occur and price and wage controls were removed.

The austerity plan in Zimbabwe was followed by economic problems of increased severity. Growth, employment, wages, and social service spending contracted sharply, inflation was not reduced, the deficit remained well above target, and many industrial firms, notably in textiles and footwear, closed in response to increased competition and high real interest rates. The incidence of poverty in the country increased during this time. On the positive side, capital formation and the percentage of exports in GDP increased and urban–rural inequality fell.

The new policies were undermined by extremely unfavorable conditions. Drought reduced agricultural output, exports, public revenue, and demand for local manufacturing. Growth during three drought-affected years (1992, 1993, and 1995) averaged 2.6 percent; during three good years (1991, 1994, and 1996) it was 6.5 percent. The new ANC regime in South Africa cancelled its trade agreement with Zimbabwe at this time and subjected its exports to punitive tariffs, just as Zimbabwe reduced its own, contributing significantly to de-industrialisation.

The government's failure to bring the fiscal deficit under control undermined the effectiveness of those elements in the program that were followed through. This led to growth in public borrowing, sharp increases in interest rates, and upward pressure on the exchange rate just as local firms were exposed to intensified foreign competition. Many firms failed, many others were forced to restructure, and new investment was discouraged in both the formal and increasingly important informal sector. The limited cuts that were made concentrated on the social services and led to serious reductions in the quality of health and education.

The government's austerity plan coupled with a relatively weak and highly protected economy came far too quickly. Uncompetitive industries were eliminated and overmanning was reduced, but in such a sudden and disruptive manner as to cause economic chaos. Similar problems occurred in certain Eastern European countries after the collapse of Communism. The government's management of its transition to capitalism was much better. The public reaction to the disaster only further undermined the economy perpetuating a vicious cycle. By the mid-1990s, there were signs of improvement. However, the patience of both the government and the people was exhausted, and a new direction was taken.

In 1998 Mugabe's intervention in the civil war in the Democratic Republic of the Congo (Kinshasa)—purportedly to protect his personal investments—resulted in suspension of international economic aid for Zimbabwe. This suspension of aid and the millions of dollars spent to intervene in the war further weakened Zimbabwe's already troubled economy.

In part through its control of the media, the huge parastatal sector of the economy, and the security forces, the government managed to keep organised political opposition to a minimum through most of the 1990s.

Indigenization debate

By 1990 there were increasing demands for greater native African participation in ownership of the economy on the basis of continuing racial inequalities in the post-colonial economy. For example, by 1991, 50% of the population received less than 15% of total annual incomes and about 15% of total consumption, while the richest three percent of the population received 30% of total incomes and were responsible for 30% of total consumption. The government-controlled economy of the 1980s tried to redistribute wealth to the black majority while emphasising racial harmony. With the increasing economic problems at the end of the 1990s and the reforms of the 1990s, new complaints were heard about the unequal racial distribution of wealth. For the ruling party, there was also a political imperative as the emergence in the late 1980s of opposition parties such as the Zimbabwe Unity Movement and the Forum Party had demonstrated the potential for political opposition from disconcerted sections of the African middle class. This emphasis on redistribution of wealth from whites to blacks was a policy that the government began to directly pursue in the mid-1990s.


Zimbabwe's economy has shrunk since 2000, in an atmosphere of political turmoil, capital flight, corruption and mismanagement. Inflation has spiralled out of control (peaking at 500 billion % in 2008) and the underpinnings of the economy in agriculture and industry have been dissipated. Due to the state of the formal economy, many Zimbabweans have begun working in the informal economy. Because of this, it is estimated that by 2009 unemployment was nearer 10% than the official 90%.

Dollarisation: 2009-2019

In February 2009, the newly installed national unity government (which included the opposition to Mugabe) allowed foreign currency transactions throughout the economy as a measure to stimulate the economy and end inflation. The Zimbabwean dollar quickly lost all credibility, and by April 2009, the Zimbabwean dollar was suspended entirely, to be replaced by the US dollar in government transactions. In 2014 there were eight legal currencies - US dollar, South African rand, Botswana pula, British pound sterling, Australian dollar, Chinese yuan, Indian rupee and Japanese yen.

Dollarization reversed inflation, permitting the banking system to stabilize and the economy to resume slow growth after 2009. Dollarization also had other consequences, including:

  • Reduced taxation and financial transparency, as people continued to keep their money out of the formal banking system.
  • Extremely high real interest rates due to lack of capital.
  • Government forced into a pay as you go system, unable to spend more than it takes in.
  • Deficits of coinage for everyday transactions, leading to the adoption of South African rand coins, sweets, airtime for mobile phones or even condoms for small change.
  • Counterfeiting currencies with which Zimbabweans are not familiar.
  • 10% growth of the economy a year up to 2012

In January, 2013 Finance Minister Tendai Biti announced that Zimbabwe's national public account held just $217. The election budget for the July 2013 presidential election was $104 million and government budget for 2013 was $3.09 billion at a projected economic growth of 5 per cent. The Economist described the 2013 election as rigged and how, after regaining full control of the government, the Mugabe government doubled the civil service and embarked on "...misrule and dazzling corruption."

In August 2014, Zimbabwe began selling treasury bills and bonds to pay public sector salaries that have been delayed as GDP growth weakened while the economy experienced deflation. US$2 million was sold in July through private placements of Six-month Treasury bills at an interest rate of 9.5%. According to IMF data, GDP growth was forecast to be 3.1% by the end of 2014, a major decline from an average rate of 10% between 2009 and 2012, while government data showed that consumer prices declined for five consecutive months by the end of June. The Reserve Bank of Zimbabwe continued to issue large values of treasury bills to support the government's over-budget spending. This added to the money supply and in effect devalued all bank balances, despite them being US Dollar denominated.

In November 2016 a pseudo-currency was issued in the form of Bond Notes despite widespread protests against them. In February 2019, John Mangudya, through a Monetary Policy presentation formally introduced a new currency, the RTGS dollar which consisted of electronic balances in banks and mobile wallets, bond notes and bond coins. This completed the conversion of all US Dollar denominated bank balances to a devalued Zimbabwean currency at a rate of 1:1.

In June 2019 the use of foreign currencies in local transactions was prohibited as part of the prospective plan for a new national currency and thus ended the dollarization period. There was still low volume trade in US Dollars, particularly in the informal sector and using in-shop bureau de change. In March 2020, blaming the challenges of dealing with COVID-19 in Zimbabwe, the government allowed formal transactions in US Dollars once more.

Government of National Unity: 2009–2013

In response to the negative long term economic situation the three parliamentary parties agreed on a Government of National Unity. Despite serious internal differences this government made some important decisions that improved the general economic situation, first of all the suspension of the national currency, the Zimbabwean Dollar, in April 2009. That stopped hyperinflation and made normal forms of business possible again, by using foreign currency such as the US American Dollar, the South African Rand, the EUs Euro or the Botswana Pula. The former finance minister Tendai Biti (MDC-T) tried to hold a disciplined budget. In 2009 Zimbabwe recorded a period of economic growth for the first time in a decade.

Post-Government of National Unity: 2013–present

Following Zanu PF's landslide electoral victory in the 2013 general elections, Patrick Chinamasa was appointed finance minister. Policies encouraging the indigenisation of the economy were fast tracked and laws requiring that 51% or more of non-black Zimbabwean owned companies had to be handed over to black Zimbabweans were implemented. This has been credited with creating further uncertainty in the economy and negatively impacting investment climate in the country. Although legislation dealing with the indigenisation of the Zimbabwean economy has been in development since 2007 and actively initiated by ZANU-PF in 2010 the policy continued to be accused of being unclear and a form of "racketeering by regulation." The government doubled the civil service and embarked on what the Economist described as "...misrule and dazzling corruption."

In April 2014, Chinamasa admitted that the country was heavily in debt and that the country needed to better attract Foreign Direct Investment (FDI). Officially Zimbabwe's debt was $7 billion, or over 200% of the country's GDP. However, this figure was disputed, with figures as high as $11 billion being quoted, once debts to other African countries and China were included. As of May 2014, it had been reported that Zimbabwe's economy was in decline following the period of relative economic stability during the Government of National Unity. It was estimated that Zimbabwe's manufacturing sector required an investment of roughly US$8 billion for working capital and equipment upgrades.

In 2016 Tendai Biti, an opposition politician estimated the government was running a deficit of up to 12% of GDP and Zimbabwe began experiencing a significant shortage of US dollars partly due to a consistent trade deficit. This prompted the Zimbabwean government to limit cash withdrawals from banks and change exchange-control regulations in order to try to promote exports and reduce the currency shortage. In June and July 2016, after Government employees had not been paid for weeks, police had set up road blocks to coerce money out of tourists and there were protests throughout Zimbabwe, Patrick Chinamasa, the finance minister, toured Europe in an effort to raise investment capital and loans, admitting Right now we have nothing. In August 2016 the government announced that it would be laying off 25,000 civil servants (8% of the country's 298,000 civil servants), cut the number of embassies and diplomatic expenses and cut ministerial expenses in an attempt to save $4 billion in annual wages and secure help from the World Bank and the IMF.

At the same time, the government sought to improve women's access to microfinance via the Zimbabwe Women Microfinance Bank Limited, which began operations 29 May 2018. The Bank operates under the supervision of the Ministry of Women's Affairs, Gender and Community Development.

Re-adoption of the Zimbabwe Dollar

In mid-July 2019 inflation had increased to 175% following the adoption of a new Zimbabwe dollar and banning the use of foreign currency thereby sparking fresh concerns that the country was entering a new period of hyperinflation. The Zimbabwean government stopped releasing inflation data in August 2019. The year-on-year inflation rate was 521% in December 2019, but Zimbabwe central bank officials said in February 2020 that they hoped to reduce the figure to 50% by the end of December 2020.