World Bank warns Zim

LIVINGSTONE MARUFU / ROBIN PHIRI / SAMANTHA MADE

The World Bank has warned that Zimbabwe must urgently tackle persistent structural weaknesses, fiscal slippages and a rapidly worsening debt position if it is to sustain its recent economic momentum and avoid sliding back into instability.

While applauding Harare for what it called “impressive” progress in stabilising inflation, consolidating the local currency and ending quasi-fiscal operations, the Bretton Woods institution cautioned that the gains remain fragile and could easily unravel without disciplined policy implementation and deeper reforms.

World Bank senior economist Victor Steenbergen said Zimbabwe’s near-term growth prospects remain positive — but clouded by formidable downside risks.

“To sustain a strong economic growth momentum, Zimbabwe will need to maintain its commitment to macroeconomic stability and press on with the Structured Dialogue Platform for arrears clearance and debt resolution,” Steenbergen said. “It is imperative to deepen ongoing reforms and tackle enduring structural constraints. Central to this effort is the effective implementation of the Presidential Ease of Doing Business Initiative.”

He said sustained reforms would reinforce competitiveness, stimulate investment and enable the country to translate growth into tangible improvements in living standards. But he warned that price and exchange-rate stability remain vulnerable.

“Continued efforts are also needed to durably anchor the existing price and exchange rate stability, which will support economic growth and job creation,” he noted.

Steenbergen said medium-term foreign currency inflows are expected to benefit from increasing mining activity and rising steel exports.

However, he cautioned that reserves remain well below international benchmarks.

“Foreign exchange reserves remain below the benchmark of three months’ import cover, with reserves estimated at US$950 million in 2025, covering only 1.1 months of imports. This exposes Zimbabwe to external shocks despite RBZ efforts to accumulate reserves,” he said.

Despite periods of moderate growth, poverty levels remain stubbornly high.

“Extreme poverty peaked in 2020 at 49% of the population… before declining to 42% in 2023 due to economic recovery and a strong agricultural season,” Steenbergen said.
“The international poverty rate… is projected to decrease from 47.6% in 2024 to 45.8% in 2025. But persistent structural challenges — such as dependence on rain-fed agriculture, slow off-farm job creation, and inadequate social protection — continue to constrain poverty reduction.”

The World Bank said Zimbabwe’s public debt has risen sharply to US$23.4 bn, up from US$21.5 billion last year — a burden that continues to choke fiscal space and limit access to concessional financing.

It expects Zimbabwe to run a fiscal deficit of around 0.4% over the medium term, although financing gaps remain acute.

“Renewed inflationary pressures could arise from exchange-rate depreciation or persistent fiscal pressures. Fiscal slippages, external shocks, and climate-related disasters — such as droughts — pose significant threats to stability,” Steenbergen warned.
“Risks may evolve from price stability, exchange rate, wage setting, contingent liabilities, unplanned expenditures from SOEs, a default on domestic debt obligations, quasi-fiscal operations and recurring climate-change-induced natural disasters.”

He said strong monetary and fiscal safeguards were needed to avoid reversing recent stability gains.

The Bank said arrears clearance and debt resolution remain the linchpin of Zimbabwe’s long-term recovery.

“The Structured Dialogue Platform provides an important set of reforms and offers a pathway to address Zimbabwe’s pressing arrears and debt problems,” the institution said.
“Resolute progress across the three reform platforms — economic, governance and land — provides a promising opportunity for the Government of Zimbabwe to end its long-standing external debt arrears.”

The Bank urged authorities to strengthen social protection to cushion vulnerable households from the impact of reforms.

Zimbabwe has requested an IMF Staff-Monitored Programme (SMP), and discussions are ongoing.

“The SMP provides an effective tool for building a credible track record of policy… Nevertheless, the government will have to make difficult decisions on spending cuts and domestic resource mobilisation,” Steenbergen said.
“It will be critical to identify and protect vulnerable households… including through further strengthening of the Zimbabwe Social Registry.”

In a statement delivered by Chief Director Joseph Mverecha, Finance permanent secretary George Guvamatanga said government fully endorsed the World Bank recommendations.

“Macroeconomic stabilisation remains our fundamental objective… We are therefore focused on disciplined and prudent fiscal policy, proactive monetary policy, and predictable, rules-based economic governance,” they said.