Causes of Liquidity Crisis in Zimbabwe after the Adoption of the Multicurrency in 2009
Loading...
Date
2019
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
-The study examined the real causes of the liquidity
crisis in the banking sector since the introduction of the
multicurrency in Zimbabwe. The liquidity crisis continued to
harm string the Zimbabwean economy despite the growth in the
aggregate money supply (M3) from US$300 million in 2009,
following the adoption of the use of multicurrency. During the
period under review, the economy registered a peak of 11.9%
growth in 2011. However, despite high economic growth rates,
banks still failed to supply cheap loans to the productive sectors,
a significant indicator of the liquidity crisis. This was worsened
by the shortage of cash in 2016. The investigation on the real
causes of liquidity crisis adopted a qualitative research method.
Data was collected using in-depth interviews. The research
concluded that liquidity crisis in Zimbabwe was caused by poor
performance of the external sector, mainly the net exports,
foreign direct investment, portfolio investment, diaspora
remittances as well as foreign borrowing. Failure by the Reserve
Bank of Zimbabwe to provide the lender of last resort function,
the growing informal sector were also considered to have had a
negative impact on the liquidityin the country. To improve the
liquidity in the country, the study recommended that the
government revert back to the principle of cash budgeting and
that there should be an increase in production of local products
which should be exported.
Description
Keywords
Citation
Chinjova, F. and Zinhumwe, R. (2019) Causes of Liquidity Crisis in Zimbabwe after the Adoption of the Multicurrency in 2009. International Journal of Research and Innovation in Social Science (IJRISS) v.III(X)