Developing a foreign exchange framework to bridge the gap between formal market and parallel market in Zimbabwe. · Electronic Theses and Dissertations

Author

Muchiseyi, Jesca

Title

Developing a foreign exchange framework to bridge the gap between formal market and parallel market in Zimbabwe.

Abstract

The existence of a significant gap between the official and parallel market foreign exchange (FX) rates is a challenge faced by many developing economies, including Zimbabwe. This disparity disrupts economic activity, discourages investment, and fuels inflation. Bridging this gap is crucial for fostering economic stability and growth. The research sought to address the FX rate gap in Zimbabwe is crucial for fostering economic stability, promoting inclusive growth, and enhancing overall well-being in the country. This research used a sequential explanatory mixed methods design and used a purposive sampling strategy with a sample of 96 participants. This research used a mixed methods approach, requiring both quantitative and qualitative data analysis techniques. The research found that periods of high inflation, budget deficits, currency devaluation, unsustainable government policies, and increased reliance on foreign currency for transactions. A system where the central bank intervenes strategically to curb excessive volatility, potentially creating a more stable environment for businesses and investors. Sound fiscal policies can foster confidence and attract foreign exchange inflows, leading to a stronger exchange rate. The study conclude that financial inclusion promotes economic growth and stability, potentially contributing to a more stable exchange rate. This study recommend that increase access to a wider range of financial products, including savings accounts, credit facilities, and mobile banking services, to bring more people into the formal financial system. The current study has provided valuable insights into the FX rate gap in Zimbabwe. However, further research is necessary to deepen our understanding and develop even more effective solutions. Future studies should conduct in-depth surveys to understand public perceptions of government policies and their impact on the FX gap. Conduct case studies on the effectiveness of specific policies implemented in Zimbabwe or other developing countries to address FX gaps.

Date

JUNE 2024

Publisher

BUSE

Keywords

foreign exchange framework, formal market, parallel market in Zimbabwe.

Supervisor

NIL