Overview

  • Extreme poverty is estimated to have risen from 29% in 2018 to 34% in 2019, an increase from 4.7 to 5.7 million people. The increase is driven by economic contraction and the sharp rise in prices of food and basic commodities. Contraction of agricultural production following an El Nino induced drought worsened the situation in rural areas. One tenth of the rural households currently indicate they are going without food for a whole day, about double the proportion of urban households. Additionally, Cyclone Idai has worsened the situation in three key provinces that typically account for 30% of agricultural output.  The drought has also led to broader impact on the electricity and water sectors, causing widespread rationing and tariff adjustments to manage costs.

    Real gross domestic product (GDP) is expected to contract by 7.5% in 2019. Shortages of foreign currency, fuel, electricity, severe drought and Cyclone Idai dampened economic activity, especially in mining and agriculture, which experienced double-digit declines. Production of major minerals like gold, diamond and coal fell by more than 27% while production of maize, the main staple food, was less than half of its level in 2018, resulting in wide-spread food insecurity. Domestic demand weakened significantly as job losses and rapidly increasing inflation eroded disposable incomes of households while fiscal austerity kept government spending low.

    Inflation has been increasing since October 2018, driven by monetization of sizable fiscal deficits of the past, price distortions, and local currency depreciation. Annual inflation reached 230% in July 2019 (compared to 5.4% in September 2018), with food prices rising by 319% in July 2019 while non-food inflation increased by 194%.  Adjustment of external accounts was swift with the current account reaching a surplus in the first quarter of 2019 for the first time since 2009. The trade deficit also narrowed significantly in January-July 2019 as imports contracted by 31% (year-on-year) on the back of forex liquidity constraints and weak demand.

    The government mandated the use of the Zimbabwe dollar as a sole legal tender on June 24, ending the multicurrency regime in place for over a decade. However, with critically low levels of official reserves, constrained access to external financing and limited tools by Central Bank to sterilize the economy, the local currency has continued to depreciate. Inflation is projected to continue increasing and to average close to 180% in 2019 before slowing down in 2020.

    The fiscal deficit is projected at around 4.9% of GDP in 2019 and will gradually decrease to 4.5% and 4.4% of GDP in 2020 and 2021 respectively. Fiscal consolidation measures agreed under the International Monetary Fund (IMF) Staff Monitored Program are expected to contain spending growth and halt monetization of the fiscal deficit. However, the supplementary budget presented on August 1, 2019 envisages a significant increase in spending to counter the negative impacts of the drought, upward adjustment of wages, and increase in social spending. Potential spending overruns (especially driven by agriculture subsidies and wages) could widen the fiscal deficit and exacerbate macroeconomic instability, including the already high inflation. 

    Poverty is projected to remain stagnant in 2020 as positive impacts of a rebound in agricultural production will be countered by the negative effects of continued high inflation, further undermining the purchasing power of the poor. Continued cash shortages as well as weak targeting of public spending on social safety nets will continue to constrain social programs and the impact on poverty.

    Real GDP growth is projected to pick up to 2.7 % in 2020, driven by a rebound in agriculture as rains largely return to normal. However, shortages of foreign currency and electricity are projected to persist in 2020, negatively affecting the recovery of industry and services.  Weak domestic demand is likely to translate into a small current account deficit in 2019 (around 1% of GDP) which is likely to slightly increase in 2020 given continued foreign currency shortages.

    In the absence of international support, Zimbabwe macroeconomic challenges may persist. With dwindling reserves, there is a high-risk exchange rate overshooting, contributing to inflationary pressures. Climate related risks may constrain recovery of the agriculture sector in the medium-term exacerbating food insecurity. Social and political pressures could lead to policy slippage, delay macroeconomic stabilization and political reforms. This might jeopardize the reform agenda under the IMF Staff Monitored Program and delay the government’s re-engagement aspirations.

    Last Updated: Oct 13, 2019

  • World Bank Group (WBG) assistance to Zimbabwe totaled $1.6 billion between 1980 and 2000. Since 2000, when direct lending was suspended because of non-payment of arrears, the 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 World Bank Board of Executive Directors in in August 2005, April 2007, and April 2013.

    Zimbabwe’s debt to the WBG is $1.5 billion, with 86% ($1.3 billion) of the debt in arrears.

    Due to the arrears, the WBG is unable to access its traditional lending facilities. It is therefore providing support to Zimbabwe through a number of trust funds (TFs), including the multi-donor Zimbabwe Reconstruction Fund (ZIMREF), its predecessor, the Zimbabwe Analytical Multi-Donor Trust Fund, the Multi-Donor Health Results Innovation Trust Fund- Global Financing Facility (HIRTF-GFF), the State and Peacebuilding Fund, the Global Environmental Facility Trust Fund, Cooperation in International Waters, and other smaller TFs that allow the WBG to remain engaged in Zimbabwe.

    Recently, the support was bolstered by an exceptional allocation of $72 million from the International Development Association Crisis Window Response for the Zimbabwe Idai Recovery Project, which aims to “address the early and medium-term resilient disaster recovery needs of cyclone-affected people.”  The project became effective in July and was formally launched in Harare on September 2, 2019. Given Zimbabwe’s non-accrual status with the Bank, the financing underscores the unprecedented humanitarian crisis caused by Cyclone Idai.

    The Global Financing Facility also supports a Health Sector Development Support Project supports results-based financing (RBF) approaches in the health sector ($53 million) to improve maternal and child health in both rural and urban areas.

    From 2015 to 2016, under ZIMREF, the following programs are under implementation:

     A results-based budgeting Technical Assistance (TA) program ($1.3 million) supports the implementation of program-based budgeting across all central government line ministries. The TA also supports the Education and Health components.

    A Capital Budgets TA ($4.3 million) supports the improvement of state-owned enterprise governance, public investment planning and management, and the review of the transport sector institutional framework with support to aviation and road tolling reforms.

    Poverty Monitoring and Evaluation Technical Assistance ($1.9 million) supports statistical capacity building with the Poverty Income Consumption and Expenditure Survey.

    Public Procurement Modernization Project ($2 million) supports the alignment of the public procurement legislation and institutional framework to the Constitution.

    Public Financial Management Enhancement Project ($10 million) to improve financial reporting, internal controls, fiscal transparency and accountability in government finances.

    National Water Project ($10 million) to improve access and quality of water and sanitation services in seven small town growth centers, improve water resources planning, and support the reforms in the water sector nationally.

    The Business Environment, Financial Sector and Investment Policy TA ($3.2 million) to improve the business climate for the private sector, especially for micro enterprises, SMEs, and agricultural smallholders.

    A Climate Change TA ($1.5 million) to strengthen the capacity of the government to integrate climate change into investment planning in forestry, agriculture, and the water/energy nexus.

    Last Updated: Oct 13, 2019

  • The Health Results Innovation Global Financing Facility helped more than 800,000 women receive antenatal care services through at least one visit at supported facilities since inception, while more than 100,000 pregnant mothers have delivered in the facilities on an annual basis. As of June 2019, the cumulative number of births attended by skilled health personnel for all participating rural and urban districts is over 817,000 and a total of 911,677 children completed immunization for the same period. Health facilities undergo routine quality of care assessments, which have shown improvements in structural and process quality with current average quality scores ranging between 80% and 85% therefore favorably comparing to previous averages that fell below 75%. The impact evaluation of the program confirmed the approach resulted in faster rates of improvements in key maternal and child health indicators e.g there was a 13% improvement in the in-facility delivery rate and a 12% improvement in postnatal care in results-based-financing districts, compared to those that had not yet started the approach. The project is increasing maternal and child health intervention in rural districts serving over 4.5 million people and expanding community involvement.

    Techincal and Analytical (TA) Work

    With support from the Zimbabwe Reconstruction Fund (ZIMREF), significant achievements have been achieved including;

    • The introduction of preparing program-based budgets by the Ministry of Finance and Economic Development. The program began in 2017 with three ministries, and to date has been extended to 11 out of 22 ministries and all local authorities.
    • The Health Sector component of the Results-based Budgeting TA supported efforts by the government and other development partners in the production of the Zimbabwe National Health Financing Policy and National Health Financing Strategy. The Education component awaits the finalization of the Teaching Professions Bill and the launch of the ICT policy in Education. ZIMREF provided support to the government in the development of the Public Entities Corporate Governance Act to enhances corporate governance, transparency and accountability clearing the way for improved performance in public entities.   The Poverty Monitoring and Evaluation TA has updated and refined the Poverty Income Consumption and Expenditure Survey while supporting the Zimbabwe Statistical Agency to modernize data processing and introduce a statutory instrument to allow for anonymization of micro-data for policy analysis The Procurement Project has contributed to the Modernization of Procurement laws, regulations and production of a cutting-edge e-Government procurement strategy that has the potential to change the landscape once rolled out. The newly established Procurement Regulatory Authority of Zimbabwe was officially launched by the President on June 3, 2019.Through the PFM project, reporting has been enhanced through the consolidation of two annual financial statements and improved coverage of internal audit in Central Government with 87% of the audit workplan completed.
    • Through the Water Project water availability and quality has been improved in three towns of Zimunya, Lupane and Guruve. Once the scope of works is complete, a total of 16,922 people will have benefitted. More than 20 significant administrative, regulatory and legislative reforms to improve the cost of doing business leading to a 3.4% improvement in the Doing Business Index supported by the Business Environment Financial Sector Investment Policy TA. Additionally, the Bank recently recognized Zimbabwe as one of the 20 top reformers on the index.

    Last Updated: Oct 13, 2019

  • In 2014, the World Bank Board of Executive Directors 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 Bank’s Third Interim Strategy Note for Zimbabwe. So far, the trust fund has received more than $43 million from Denmark, the European Union, Norway, Sweden, Switzerland, the UK, and the World Bank’s State and Peace Building Fund.

    The Health Results Innovation Trust Fund Global Financing Facility’s grant of $53 million complements Zimbabwe’s ongoing Health Sector Development Project which 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 government’s contribution is $21.2 million. Cordaid is the implementing partner.

    Development partners also include

    the Global Environmental Fund, which has provided 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 project is currently developing a Public Private Community Partnership for the Sidinda ward community. Due to last drought season the restocked buffaloes have feed challenges. Communities are supplementing by cutting grass.

    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: Oct 13, 2019

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LENDING

Zimbabwe: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments


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Additional Resources

Country Office Contacts

Main Office Contact
Block 3, Arundel Business Park
107 Norfolk Road, Mount Pleasant
Harare, Zimbabwe
(+263-4) 369-130/1
For general information and inquiries
Cheryl Khuphe
Communications Officer
(+263-4) 369-130/1
ckhuphe@worldbank.org
For project-related issues and complaints
zimbabwealert@worldbank.org