The World Bank in Zimbabwe

Zimbabwe has strong foundations for accelerating future economic growth and improving living standards. Private sector-led growth is critical to maximize the country’s potential.  For decades after independence, Zimbabwe was one of the countries with the highest living standards in Africa—buttressed by a skilled workforce and infrastructure superior to most countries. Notwithstanding its economic decline since 1995, it continues to boast several sectors that are still competitive or could—in the short to medium term—be competitive regionally and globally. The recently completed Country Private Sector Diagnostic finds Zimbabwe highly competitive in several value chains in agriculture and agribusiness industries, including sugar, cotton, horticulture, and meat and dairy. Furthermore, tourism and mining of energy transition minerals –including ample lithium reserves – hold significant potential in the short term.

To realize this potential fully, Zimbabwe needs to find new ways to capitalize on existing and emerging opportunities for the private sector to drive economic growth and harness the country’s comparative advantages, including its relatively strong human capital, comparable to that of upper-middle-income economies in Sub-Saharan Africa, and its abundant mineral and natural resources.

Economic context

Zimbabwe’s economic development continues to be hampered by several challenges. Real GDP is estimated to have grown by 5.5% in 2023, after a 6.5% growth in 2022, due to an expansion in agriculture, mining, and remittances-induced services growth. Nevertheless, macroeconomic volatility fueled by monetary instability and substantial exchange rate distortions keeps Zimbabwe’s economic activity below its potential.

Inflationary pressures remain high in 2024 as local currency depreciation intensifies. In February 2024, annual inflation increased for the fourth consecutive month, reflecting the sharp depreciation of the local currency at both the official and parallel foreign exchange markets. Annual inflation increased from 26.5% in December 2023 to 47.6% in February 2024. The official exchange rate depreciated by 788% in 2023, with the parallel market premium estimated at 30% as of February 2024.

Fiscal pressures increased in 2023 ahead of national elections and the transfer of the Reserve Bank of Zimbabwe’s (RBZ) external liabilities to the treasury. The government increased civil servants’ salaries in foreign and local currency. The Treasury took over the servicing of debt of $1.8 billion in external liabilities from RBZ. Meanwhile, some of the revenue proposals in the 2024 budget have been reversed, casting doubt on the credibility of the budget. Nevertheless, the implemented taxes, like the sugar tax, have led to increased prices. The current account surplus narrowed in 2023 as remittances from non-governmental organizations contracted.

Real GDP growth is projected to slow further to 3.3% in 2024, partly reflecting the impact of structural bottlenecks, macroeconomic instability (high inflation and severe exchange rate volatility), an El Niño-related drought, and lower commodity prices. El-Nino-induced drought will affect most rain-fed crops and may intensify electricity supply shortages. Nevertheless, continued increases in remittances will help to stimulate growth in services (wholesale and retail trade) and construction. Inflationary pressures will intensify in 2024, given drought conditions and domestic tax increases. The fiscal deficit will increase in 2024, driven by high-interest payments on external debt, drought mitigation-related spending, wage pressures, and the reversal of several budget revenue measures. The fiscal deficit is projected to reach 2.5% of GDP in 2024 before slowing to under 2% in the medium term. The current account surplus is expected to shrink further, reflecting increased imports in the face of drought conditions and lower commodity prices.

Key Developmental Challenges

Although extreme poverty has declined since its peak in 2020, it remains high in the context of cyclical agricultural production and elevated food prices. Persistent inflation, high dependence on low-productivity agriculture, slow structural transformation, and intermittent shocks like drought, natural disasters, and the COVID-19 pandemic have contributed to the high rate of poverty and vulnerability in Zimbabwe. High, unsustainable debt and arrears to international financial institutions (IFIs) limit fiscal space and growth potential.

Last Updated: Apr 09, 2024

World Bank Group (WBG) assistance to Zimbabwe totaled $1.6 billion between 1980 and 2000. While Zimbabwe is in arrears, the WBG has remained fully engaged through financing from the global trust funds and the  Country’s Multi-Donor Trust Fund, the Zimbabwe Reconstruction Fund (ZIMREF), renamed the Zimbabwe Socio-Economic Transformation (ZISET) Fund.  ZIMREF (established in 2014) raised $52 million and has supported the World Bank’s primary engagement in Zimbabwe.

ZISET, with a closing date of March 2028, will support Zimbabwe under two pillars: (1) ensuring socio-economic stability and (2) building resilience.  Three thematic arears will guide the implementation.

1.     Promoting private sector-led growth will prioritize the growth and the jobs agenda.  Activities include addressing bottlenecks in the business environment (e.g., licensing) and in enabling sectors (renewable energy, digital) to strengthen the regulatory environment and institutional capacities.

2.     Enhancing real sector competitiveness and investment, seeks to increase competitiveness of high-growth potential sub-sectors like horticulture and tourism and promote investment in specific agricultural value chains with high competitiveness and revealed comparative advantages.

3.     Establishment of building blocks of a social registry system and an immediate focus on the design and implementation of the social impact mitigation program to complement critical subsidy reform.  

ZISET is supplemented by other trust funds which fund sector-specific activities. The Health Emergency Preparedness and Response Trust Fund (HEPRT), and the Energy Sector Management Assistance Program (ESMAP) Trust Funds provided a grant of $6.6 million to the Zimbabwe COVID-19 Emergency Response Project (ZCERP) to deploy and manage  COVID-19 vaccines and to strengthen related health system capacity. Additional financing ($15 million) funded by the Global Financing Facility (GFF) for essential health services was approved and incorporated into ZCERP. The Health Sector Development Project funded by the GFF (additional financing of $25 million) recently closed in March 2024.

Following Cyclone Idai in March 2019, the WBG provided an exceptional allocation of $72 million from the Crisis Response Window of the International Development Association (IDA) for the  Zimbabwe Idai Recovery Project (ZIRP), which aimed to address stages of the early recovery and medium-term disaster recovery for people affected by the cyclone. The ZIRP responded to Cyclone Idai’s disproportionate effects on eastern Zimbabwe’s poorest and most vulnerable. It maintained a strong focus on poverty reduction by integrating local financial stabilization into its activities through the provision of otherwise costly food and social services, the restoration and generation of livelihoods, as well as sustainable infrastructure and resilience to future disasters. The project closed in June 2023.

The International Finance Corporation (IFC) provides technical assistance to various activities, including expanding access to agricultural sector finance and enhancing Victoria Falls's competitiveness as a tourism destination, through the Zimbabwe Destination Development Program (ZDDP).  The ZDDP focused on strategic air access, destination management, marketing, policy, and SME support in Victoria Falls, the country’s primary tourism destination. In 2023, Victoria Falls increased its air capacity by 5% over 2019, 15% ahead of the sub-Saharan average.

Through Advisory Services and analytical work, the WBG has developed key diagnostics to contribute to the development agenda. Recent products include:

·       Zimbabwe Country Economic Memorandum

·       Zimbabwe Poverty Assessment,

·       Zimbabwe Economic Update

·       Country Climate Development Report

·       Country Private Sector Diagnostic

·        Zimbabwe Gender assessment

·       Gender-Based Violence (GBV) assessment.

·       Mapping and Valuing Ecosystem Services in Zimbabwe

Investment climate reform programs led by IFC have also yielded significant policy, legislative, and regulatory reforms, including such foundational laws as a new Companies Act, an Insolvency Law, and laws to create a Commercial Court.  This analytical work has advanced the understanding of policy and institution gaps and set blueprints for progress. Many WBG recommendations – including on private sector development, public sector systems, and human capital – have been included in the government’s National Development Strategy (NDS1).  

Analytical work in Zimbabwe’s agricultural sector has been focused on policy dialogue, production enhancement, and climate resilience. Ongoing policy dialogue has focused on strategic policy actions and climate investments designed to fortify the resilience of the agri-food sector against environmental challenges. To enhance productive capacity and market resilience, a sectoral deep dive note was produced on five critical agricultural value chains—sugar, maize, horticulture (with an emphasis on macadamia), cotton, and livestock (with a focus on dairy). The culmination of these sector-specific analyses led to the creation of a comprehensive Guide Note on drafting agricultural investment prospectuses. This tool led to the development of an Agriculture Investment Factsheet and detailed Investment Prospectus by the Ministry of Agriculture, which will serve as a cornerstone to attract investment and foster sector growth.

In response to the devastating loss of nearly 300,000 cattle to feed scarcity and tick-borne diseases, World Bank technical assistance pivoted towards fostering resilient and responsible livestock development. This includes championing One Health approaches and exploring innovative avenues like insect-based food and feed solutions. Zimbabwe is at the forefront of pioneering work on insects for food, feed, and fertilizer, with pilot projects in the Tongogara refugee camp and cyclone-impacted regions of Manicaland through ZIRP. This emerging field contributes to a circular economy and offers a sustainable pathway to bolstering food security and livelihoods in the face of environmental challenges.

Last Updated: Apr 09, 2024

Despite a challenging operating context, the Zimbabwe Reconstruction Fund (ZIMREF) has been pivotal in supporting legislative reforms and early reform implementation.

• Financial Management:  ZIMREF helped to strengthen the public procurement framework, improve the coverage and reporting of internal and external audits, and improve Parliamentary and civil society oversight.  Forty-six government funds started using Public Financial Management Systems (PFMS) against a target of 10. The Integrated Financial Management System (IFMIS) was successfully rolled out to 63 districts by setting up district kiosks.
• Poverty Monitoring:  ZIMREF assisted the Government in monitoring poverty outcomes and their integration into national strategy and planning documents.  This included financing of the 2017 Poverty, Income, Consumption and Expenditure Survey (PICES), release of the 2017 poverty report, and publication of poverty microdata for 2017 and 2019.
• Human Capital:  ZIMREF has also supported the establishment of a basic social protection Management Information System (MIS), which is the basis for a social registry system.
• Water Supply:  ZIMREF strengthened the Zimbabwe National Water Authority and the regulatory framework in the sector increased access to piped water for 34,810 people (74% more people than the target) and provided installations of new water connections for 1,265 households in three growth points (Guruve, Lupane, and Zimunya).
• Climate Change: ZIMREF helped develop Zimbabwe’s climate policies, its pipeline of climate adaptation, and its mainstreaming of climate changes in investment planning.

The Zimbabwe Idai Recovery Project (ZIRP) closed in June 2023, meeting or exceeding all planned recovery and reconstruction targets. The project achieved the following:

• 661,692 people, including 3,611 Internally Displaced People (IDP), were provided with integrated health services, and coverage in hard-to-reach areas was extended through the training of 2,843 Village Health Workers (VHWs).
• Food assistance interventions reached 239,324 beneficiaries within the affected communities.
• 12,111 GBV survivors benefited from the Project, receiving survivor-centered health services and comprehensive legal and psychosocial support.
• 47km of community roads were rehabilitated as well as seven cyclone damaged community schools, three community health facilities and one agro-market all using revised design and build back better standards.
• 482 water systems and 3,789 sanitation facilities were rehabilitated and restored, reaching 44,106 households.
• 88,516 cyclone-affected students were supported with education supplies
• Six irrigation schemes were rehabilitated with substantial advisory and extension support services provided to over 10,000 farmers.
• Two new community radio stations were established to disseminate early warning information in the two affected districts, Chimanimani and Chipinge

The Health Sector Development Project has increased coverage and quality of an integrated package of Reproductive, Maternal, Neonatal, Child, Adolescent health and nutrition (RMNCAH-N) services and also has accelerated progress in the National COVID-19 Response, providing technical assistance and dialogue at the national level on response and vaccine deployment. The project has achieved the following:

•  Provided more than 1 million women antenatal care services, consisting of at least one visit a year to a supported facility.
• At least 92% of births (for those who booked) have been attended by skilled health personnel in participating rural districts, benefiting an estimated 1.5 million women.
• Improved the quality of care at health facilities in terms of structure and process, with average scores (awarded by patients) ranging between 80% and 85% to compare favorably with previous averages that fell below 70%. At least 54% of the health facilities registered an increase in quality scores since the previous quarter at the end of December 2022.
• From its inception in 2014 to date, over 81,000 women were enrolled into an urban voucher component of the RBF program, which played a critical role in strengthening the urban health systems and improving access to maternity services for the urban poor in Harare and Bulawayo Metropolitan Provinces.   

• The Urban Voucher initiative was scaled up to cover 35 health facilities in Harare and Bulawayo which has helped to improve access to more vulnerable women and children with increasing urban poverty levels exacerbated by the COVID-19 Pandemic.

• The Results Based Financing (RBF) Program’s impact evaluation confirmed the approach resulted in faster rates of improvements in key maternal and child health indicators, for example, a 13% improvement in the in-facility delivery rate and a 12% improvement in postnatal care in RBF districts, compared to those that have not yet started the approach.

Last Updated: Apr 09, 2024

The World Bank Group works with a variety of partners in Zimbabwe. The Zimbabwe Socio-Economic Transformation Trust Fund is supported by the United Kingdom (FCDO), Canada and Norway.

CORDAID implements the health projects while UNOPS working with eight other UN Agencies implemented the Zimbabwe Idai Recovery Project.

The African Development Bank supports the country portfolio through the Kariba Dam Rehabilitation Project that is implemented through Zambia.

Last Updated: Apr 09, 2024