In the 1990s, Zimbabwe's economicgrowth began to slow following a balance of payments crisisand repeated droughts. By the late 1990s Zimbabwe'seconomy was in serious trouble driven by economicmismanagement, political violence, and the wider impact ofthe land reform program on food production. During 2007Gross Domestic Product (GDP) contract by more than 6percent, making the cumulative output decline over 35percent since 1999. The unrelenting economic deteriorationis doing long-term damage to the foundations of theZimbabwean economy, private sector investment is virtuallyzero, infrastructure has deteriorated, and skilledprofessionals have left the country. With inflationaccelerating, the Government introduced, in 2007, blanketprice controls and ordered businesses to cut prices by half.Despite the strict price controls inflation continues torise as the root cause of high inflation, monetization ofthe large public sector financing needs remains unaddressed.A large part of the high public sector deficit is due toquasi-fiscal spending by the central bank on mainlyconcessional credits and subsidized foreign exchange forpriority sectors, unrealized exchange rate losses, andlosses incurred by the central bank's open marketoperations to mop up liquidities.
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