Zimbabwe experienced severe exogenous shocks (cyclone Idai, protracted drought, and the COVID-19 pandemic) during 2019-20, which along with policy missteps in 2019, led to a deep recession and high inflation. Real GDP contracted cumulatively by 11.7 percent during 2019-20 and inflation reached 837 percent (y/y) by July 2020. Reflecting good rainfall and relaxation of containment measures, real GDP rose by 6.3 percent in 2021. A tighter policy stance since mid-2020 (relative to 2019) has contributed to reducing inflation to 60.7 percent (y/y) at end-2021. However, high double-digit inflation and wide parallel foreign exchange (FX) market premia persist. The economic downturn and high inflation increased the financial system vulnerabilities. Extreme poverty has risen and about a third of the population is at risk of food insecurity. The international community seeks improvements in domestic political conditions and economic policies to initiate reengagement with Zimbabwe. The authorities have started token payments to external creditors in a bid to revive international reengagement.
International Monetary Fund. External Relations Dept.
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Rapid depreciation of the parallel market rate in 2002 gave exporters little incentive to surrender receipts through the official system, and inflows into the RBZ remained low. The government responded by raising the surrender rate and tightening exchange restrictions in November 2002. Faced with increasing foreign exchange shortages, the government eventually depreciated the official rate for exports in end-February 2003, but to date with little effect.
The paper examines the behavior of daily spot exchange rates for a sample of industrialized countries which are generally considered to be floating with only occasional official foreign exchange market intervention. This behavior is then compared to the behavior of the exchange rates of a sample of sixteen developing countries whose regimes are often classified as being “flexible”. Considerable differences in the way these developing countries’ exchange rate regimes operate is apparent from the daily data, with some sharing similarities with the regimes of the industrialized countries and with others demonstrating regime shifts and other marked discontinuities.
Daudi Ballali, Mr. Pierre Dhonte, Mr. G. Terrier, and Mr. Stéphane Cossé
This paper highlights selected recent developments in the economies of sub-Saharan Africa. It notes that the outlook for commodity prices has improved, and with it the outlook for economic activity beyond 1994; it also notes, however, the need for higher savings and investment to sustain growth over the medium term. The paper also covers two aspects of structural adjustment: the liberalization of exchange and trade systems, which has been extensive and has resulted in a sharp reduction in exchange market distortions; and the momentum of regional integration in the CFA countries and in the Southern Africa region.
This volume, by Joseph Gold, discusses some of the major letgal effects of fluctuating exchange rates in both public international law and national law. The problems and similarities in the solutions are reviewed, and the author recommends further developments in the law.
The Articles of Agreement (Articles) of the International Monetary Fund (IMF) and the practices of the IMF under that treaty are the principal sources of public international law on the exchange rates of the currencies of member states (members) of the IMF. By the end of September 1990, there were 154 members, among which a great variety of political and economic systems were represented. The most notable nonmembers were the Union of Soviet Socialist Republics and Switzerland, but the latter country and a number of other countries have applied for membership.
The fluctuation of exchange rates has given rise to problems of allocating the advantage or disadvantage resulting from changes in exchange rates. In one situation, the problem is bilateral, arising between the parties to a transaction or series of transactions. In the case of disagreement between them on the appropriate exchange rate for settlement when there are two or more possible rates, the advantage that one party enjoys because of the rate that is chosen is matched by the correlative disadvantage suffered by the other party. This kind of problem arises in many forms between the parties to a contract. Sometimes, the judicial solution of a problem may depend on interpretation of the contract.1 In other cases, the outcome may depend on the interpretation of an international convention,2 or the way in which a particular legal concept, such as restitutio in integrum, is applied.3 In some cases, courts have relied on the proposition that a party should have taken steps to protect itself against exchange risk in accordance with the normal practice of the trade in which the transaction or transactions occur.4 It may even be possible to imply a term that a party is to behave in this way.
Fluctuations in exchange rates can have disturbing and even catastrophic effects on contracts, particularly if performance is necessary over a long period or at a time far ahead. As a consequence, what are known as hardship clauses have become common.1 A hardship clause can be described as a term of a contract under which the contract can be reviewed if a change in circumstances occurs that fundamentally modifies the initial balance between the obligations of the parties, so that performance, though not impossible, becomes unusually onerous for one party.
In the twentieth century, sterling and the U.S. dollar have functioned successively as hegemonic currencies. The deutsche mark performs something like this role within the EMS, and in relation to some other countries as well even though they are not participants in the EMS. Switzerland and Austria, for example, take cognizance of the leadership of the deutsche mark in fashioning their own policies.