Overview

  • Overview

    Zimbabwe’s recovery from decades of economic contraction has faltered and again the economy faces serious challenges due to external shocks and policy. Growth has slowed sharply from an average 8% from 2009 to 2012, caused by significant shifts in trade and a series of major droughts. An ill-timed fiscal expansion in 2016 saw the deficit rise to 10% of Gross Domestic Product (GDP) and the banking sector suffer severe cash shortages. Extreme poverty, estimated to have fallen from 2009 to 2014, is projected to have risen substantially.

    Nevertheless, Zimbabwe’s fundamentals for economic growth and poverty reduction remain strong provided the country can tackle its political fragilities and build consensus around inclusive and competitive investment policies. The economy is projected to grow by just over 2% in 2017 as it recovers from two years of drought, but is constrained by macroeconomic imbalances.

    The political and economic crises that characterized the economy between 2000 and 2008 nearly halved its GDP, the sharpest contraction of its kind in a peacetime economy. This raised poverty rates to more than 72%, and left a fifth of the population in extreme poverty. Health, education, and other basic services—once regional models—largely collapsed, and the Human Development Index (HDI) in 2011 stood at 173 out of 187 countries. A lengthy isolation from the international community restricted aid flows and saw a build-up of arrears to multilateral and bilateral partners.

    After experiencing record hyperinflation in 2008, the country adopted in 2009 a multicurrency regime, or dollarization, that ushered in macroeconomic stability and positive economic growth.  From 2009 to 2012, the economy rebounded, with growth rates averaging 8.7% per year.  Inflation stabilized; revenues and bank deposits recovered sharply. The country also began making token payments on arrears and embarked on a series of Staff Monitored Programs with the International Monetary Fund (IMF).

    Social services recovered amid resurgent public and donor spending. Zimbabwe’s HDI ranking rose to 155 in 2015, and a Multi-Indicator Cluster Survey in 2014 revealed that in several key areas, Zimbabwe has regained its outcomes of the early 1990s. Underpinning this is a reduction in HIV prevalence to about 15% since 2014, down from more than 40% in 1998. Life expectancy recovered from 43.1 years in 2003 to 53.3 in 2012, compared with a high of 61.6 years in 1986. The maternal mortality rate declined from 960 deaths per 100,000 live births in 2010–2011, to an estimated 614 deaths in 2014; under-five mortality fell from 94 per 1,000 in 2009 to 75 in 2014. Despite this, Zimbabwe missed a significant number of the Millennium Development Goals.

    In 2015, Zimbabwe proposed a plan to clear arrears and resumed much needed financing from international financial institutions in 2016. Fiscal expansion in 2016, exacerbated by delays in implementing this, contributed to declining market confidence, a sharp economic slowdown and increasing financial sector fragility. Following the El Nino drought, which was less severe than expected, rising liquidity challenges stymied growth to 0.7% in 2016. The government faced difficulties in paying civil service salaries. Growing dissatisfaction with economic and social challenges have seen a resurgence in political fragilities in the run-up to the 2018 elections.

    Zimbabwe has enormous potential given its generous endowment of natural resources, existing stock of public infrastructure, and comparatively skilled human resources. Realizing this will require prompt action to correct fiscal policies, re-stabilize the monetary system, and resolve arrears to international lenders that would allow for a resumption of development financing. It will also require the renewal of capacity in the public sector, and investment reforms.

    Last Updated: Apr 01, 2017

  • World Bank Group (WBG) assistance to Zimbabwe totaled $1.6 billion between 1980 and 2000. Since 2000, when direct lending was suspended on account of non-payment of arrears, the d Bank has maintained support for Zimbabwe through a variety of non-lending instruments and trust funds. This support has been governed by three successive Interim Strategy Notes (ISNs) presented to the Board in in August 2005, April 2007, and April 2013.

    The ISN III FY13-15, focuses on supporting economic recovery and sets out scenarios for future support. Resumption hinges on arrears’ clearance. Zimbabwe’s debt to the WBG is more than $1.4 billion, with over $1.1 billion in arrears.

    In the meantime, WBG support has been financed by trust funds, including the Zimbabwe Reconstruction Fund, the predecessor Zimbabwe Analytical Multi-Donor Trust Fund, the Multi-Donor Trust Fund for Health Results Innovation, the Water and Sanitation Program, the State and Peacebuilding Fund, the Global Environmental Facility Trust Fund, Cooperation in International Waters, Financial Sector Reform and Strengthening, and others.

    From 2015 to 2016, under ZIMREF, the following initiatives began implementation:

    •  A results-based budgeting Technical Assistance (TA) program ($1.3 million) is to support the implementation of program-based budgeting across all central government line ministries by 2019, provide technical assistance to the Ministries of Health and Child Care and Primary and Secondary Education to strengthen teacher development and sector planning. 
    • A capital budgets Technical Assistance ($4.2 million) supports the improvement of state-owned enterprise governance, public investment planning and management, and the review of the transport sector institutional framework.
    • Poverty Monitoring and Evaluation Technical Assistance ($2.5 million) supports statistical capacity building with the 2017 household survey and the development of Zimbabwe’s first poverty reduction strategy paper.
    • Public Procurement Modernization Project ($3.5 million) supports the alignment of the public procurement legislation and institutional framework to the 2013 Constitution, and the development of an e-Government Procurement pilot.  
    • Public Financial Management Enhancement Project ($20 million) aims to improve financial reporting, internal controls, fiscal transparency and accountability in government finances.
    • National Water Project ($20 million) aims to improve access and quality of water and sanitation services in seven small town growth centers, improve water resources planning, and support the reform of the water sector nationally
    • The Business Environment, Financial Sector and Investment Policy TA ($3.2 million) aims to improve the business climate for the private sector, especially for micro enterprises, SMEs, and agricultural smallholders
    • A Climate Change TA ($1.5 million) aims to strengthen the capacity of the government to integrate climate change into investment planning in forestry, agriculture, and the water/energy nexus. 

    Last Updated: Apr 01, 2017

  • Multi-Donor Trust Fund for Health Results Innovation: Improvements have been noted in the availability, accessibility, and acceptability of MCH services. To date over 580,000 women have accessed antenatal care, over 100,000 women living with HIV have received anti-retroviral drugs to reduce mother to child transmission, and over 550,000 children have been immunized.

    Bank Resolution and Crisis Management Strengthening has assisted in bank supervision and deposit protection. The TA has also assisted with input into the review of the now amended banking act. The TA ends in December 2017.

    Technical and Analytical Work

    With funding from the Zimbabwe Reconstruction Fund and building on earlier funding from DfiD, USAID’S SERA and African Development Bank (AfDB), the Ministry of Finance and Economic Development led the pilot preparation of program budgets for the Ministry of Primary and Secondary Education, the Ministry of Health an d Child Care, and the Ministry of Public Service, Labor, and Social Welfare. For the 2017 National Budget, six more line ministries were assisted.

    The BEFSIP program supported efforts to update13 pieces of legislation and associated regulations. The 2016 Doing Business index indicated that the number of days it takes to register business has reduced in Zimbabwe from over 120 to 91, and the time to get construction permits from 448 to 238 days.

    Through the Procurement Project, the government received support on legislative reforms that included the development of public procurement and disposal of public assets and related regulations. The Bill containing them is under consideration by the Parliamentary Legal Committee.  

    ZIMREF (see PARTNERS) also provided support to Zimbabwe’s Statistical Agency to complete the technical work and publication work of the Zimbabwe Poverty Map.  The Ministry of Finance received support in preparation of the  Interim Poverty Reduction Strategy Paper (IPRSP).

    Last Updated: Apr 01, 2017

  • In 2014, the Board of Executive Directors of the World Bank approved the Zimbabwe Reconstruction Fund (ZIMREF), a country-specific umbrella-type multi-donor trust fund that contributes to strengthening Zimbabwe’s systems for reconstruction and development. ZIMREF is the key instrument for implementing the World Bank Third Interim Strategy Note for Zimbabwe and supporting the Zimbabwe Agenda for Sustainable Socio-Economic Transformation. ZIMREF has received $40.4 million from Denmark, the European Union, Norway, Sweden, Switzerland, the UK, and the World Bank’s State and Peace Building Fund.

    A third additional financing grant of $5 million from the Health Results Innovation Trust Fund  (HRITF) will complement Zimbabwe’s ongoing Health Sector Development Project that supports the introduction of Results-Based Financing in rural and low-income clinics, the piloting of voucher programs in urban clinics, and quality intervention throughout. The project is increasing maternal and child health intervention in rural districts serving over 4.5 million people and expanding community involvement. This additional financing will bring HRITF’s contribution to $40 million, and the Government of Zimbabwe’s to $15 million. Cordaid is the implementing partner.

    Development partners also include:

    • The Cooperation in International Waters in Africa:  $6 million grant to support preparation of the Zambia–Zimbabwe, Batoka Gorge Hydro-Electric Scheme.
    • The Water and Sanitation Program: $800,000 provides the Service Level Peer Benchmarking program among urban water utilities and supports the development of a water sector regulator.
    • The Global Environmental Fund: a $5.6 million grant for the Hwange Sanyati Biological Corridor Project to develop land use and resource management of local communities and support investments in alternative livelihoods, improved forest management, and reverse land degradation, is implemented by the World Wildlife Fund Zimbabwe.
    • The Global Facility for Disaster Reduction and Recovery: is funding a Natural Disaster Risk Reduction disaster project in Kariba district with grant financing of just under $600,000, implemented by the Danish and Zimbabwe Red Cross.
    • The Financial Sector Reform and Strengthening Initiative Strengthening Bank Resolution and Crisis Management Technical Assistance: $452, 000 in funding to assist the authorities in strengthening bank resolution, improve crisis preparedness and management, and increase the resilience of the deposit insurance mechanism.
    • The European Union, AfDB, ZRA, and Embassy of Sweden are funding the Kariba Dam Rehabilitation Project. The $294 million is for safety operations for the dam.

    Last Updated: Apr 01, 2017

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Additional Resources

Country Office Contacts

Main Office Contact
(+263-4) 369-130/1
Harare
Cheryl Khuphe
Communications Officer
Block 3, Arundel Business Park
107 Norfolk Road, Mount Pleasant
Harare, Zimbabwe
(+263-4) 369-130/1
ckhuphe@worldbank.org
Washington
Emmanuel Ngankam
Country Program Coordinator
1818 H Street NW
Washington DC 20433
+1-202-458-7654
enoubissie@worldbank.org