Zim to outpace regional peers

SAMANTHA MADE

Zimbabwe is on track to deliver the fastest economic growth in Southern Africa this year, with the African Development Bank (AfDB) projecting a 6% expansion, outpacing regional peers and marking the country’s strongest performance in more than a decade.

The upbeat outlook, underpinned by a rebound in agriculture, new mining ventures, resurgent industrial activity and rising infrastructure investment, suggests that years of painful reforms are finally bearing fruit.

But behind the optimism looms a stark reality, Zimbabwe remains shackled by a crippling US$21bn debt burden, which continues to block access to concessional financing and threatens to blunt the momentum of recovery.

AfDB Principal Country Economist, Kelvin Banda, told Business Times, a market leader in business, financial and economic reportage, that the growth forecast is a signal that policy reforms are beginning to take root.

“We are forecasting 6% growth from 2% last year, driven by the recovery in agriculture, mining, and manufacturing. Zimbabwe is one of the fastest-growing economies in the Southern African region. What is critical now is to sustain this momentum through fiscal discipline and a tight monetary policy framework.

Fresh estimates value Zimbabwe’s economy at US$45.7bn in 2025, up from US$35.2bn a year earlier. GDP per capita has crossed the symbolic US$3,000 mark, reflecting productivity gains across sectors.

Debt-to-GDP has fallen to 46.5%, comfortably below the Sub-Saharan African average of 61%.

Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, who anchored the 2025 budget on a 6% growth assumption, said the projection was realistic.

“All sectors are expected to record positive growth, underpinned by a strong agricultural season, improved electricity generation, a stable exchange rate, and inflation moderation. This resilience is striking, given declining mineral prices and a subdued global economy.”

Zimbabwe’s economic structure is also shifting. Manufacturing now contributes 15.3% of GDP, overtaking agriculture at 9.3%, while mining, financial services and retail trade also weigh heavily. For policymakers, this diversification marks a rare opportunity to break from decades of over-reliance on raw commodities.

The Reserve Bank of Zimbabwe (RBZ) has anchored the rebound through strict monetary tightening and the introduction of the Zimbabwe Gold (ZiG) currency.

RBZ Governor John Mushayavanhu credited the gains to strong inflows and rising confidence.

“The stable macroeconomic conditions have supported recovery across all sectors. Foreign currency inflows reached US$7.2bn in the first half of 2025, up from US$5.9bn last year, enabling us to build reserves to more than US$730m. This has anchored the currency and boosted confidence.”

The ZiG now accounts for over 40% of electronic transactions, a shift authorities say is crucial in reducing dollarisation. Reserve money growth—long the Achilles heel of monetary stability—has been curbed through tighter liquidity controls.

Yet, behind these headline gains, Zimbabwe’s unsustainable debt crisis remains the elephant in the room.

The country owes US$21bn, including US$13.5bn in external obligations. Almost 70% of this is in arrears to international creditors such as the World Bank, Paris Club members, and the AfDB itself.

These arrears block access to concessional funding, leaving Harare reliant on costly short-term facilities and limited domestic revenues to finance infrastructure and social services.

With the revenue-to-GDP ratio sliding to 15% from historic levels of 18%, fiscal space is narrowing further.

The ongoing arrears clearance process, led by outgoing AfDB president Akinwumi Adesina and former Mozambican president Joaquim Chissano, has so far failed to secure the political consensus needed among creditors.

Economist Joshua Sibanda cautioned that growth momentum may be short-lived.

“Zimbabwe has delivered a remarkable short-term recovery story, but the debt overhang remains the elephant in the room. Without arrears clearance and a credible re-engagement with global lenders, growth will be difficult to sustain beyond this year.”

The AfDB and World Bank warn that Zimbabwe’s outlook is highly exposed to external shocks—volatile commodity prices, tightening global financial conditions and climate variability.

The World Bank projects a 13% fall in the global commodity index this year, with Brent crude averaging US$64 per barrel. Gold, Zimbabwe’s top export, is expected to remain elevated but volatile, leaving fiscal revenues vulnerable.

Domestically, energy shortages and erratic rainfall remain pressing risks. A weak agricultural season could drag down overall growth, while power deficits threaten to derail mining and industrial output.

Although RBZ reserves have surged by 150% in a year, they remain below the recommended three to six months of import cover.

If AfDB projections materialise, Zimbabwe will outpace South Africa’s 1.5% growth and Zambia’s 4% expansion, cementing its status as the fastest-growing economy in Southern Africa. Sub-Saharan Africa as a whole is forecast to grow at 3.7% this year.

The rebound is striking given Zimbabwe’s turbulent history of hyperinflation, repeated currency meltdowns, and long spells of international isolation. But economists warn the recovery is fragile.

Without deeper reforms—particularly on debt, governance, and energy, Zimbabwe risks sliding back into vulnerability.

Foreign investors remain cautious. A Harare-based fund manager, who requested anonymity, told Business Times:

“The macroeconomic signals are improving, and sectors like mining, agriculture and tourism are rebounding strongly. But unresolved debt arrears and political risks mean Zimbabwe is still priced as a high-risk play. Sustained policy consistency will be critical if the country is to attract patient capital.”

Parliament has also weighed in on the debate. Masvingo legislator Tanatswa Mukomberi argued that the 6% growth forecast was achievable given the projected 21% expansion in agriculture and the dominance of manufacturing.

“The expected growth rates of such an industry and the dominance of the manufacturing sector make a 6% projection a reality, as it offsets any slight drop in other industries,” he said.

But Dzivarasekwa MP Edwin Mushoriwa was more critical, accusing Finance Minister Mthuli Ncube of missing an opportunity to restore trust.

“The Minister missed an opportunity to bring the nation together and strengthen confidence in public finance management. He is also aware of the constitutional requirement under Section 307 to seek condonation for excess expenditure outside Parliament approval.”

For Harare, 2025 is shaping up as both a milestone and a moment of reckoning: the fastest growth in Southern Africa, yet with a US$21bn debt anchor weighing down its prospects.

The AfDB insists that if reforms hold, Zimbabwe’s rebound can shift into a sustained recovery story.

But without decisive progress on arrears clearance and governance reforms, the country risks being pulled back into a familiar cycle of fragility.