Overview

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Context
Strategy
Results
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Zimbabwe’s recovery from decades of economic contraction has largely been shaped by agriculture growth and investment patterns. Zimbabwe had double-digit growth rates shortly after dollarization in 2009, but growth started to decline in 2012 as confidence started to diminish and the investment-to-gross domestic product (GDP) ratio declined sharply. Besides, higher growth in 2017 of 3.4% (partly due to recovery in agriculture production), up from 0.6 in 2016, the economic growth trend is now some 2% below the average for Sub-Saharan Africa. It is projected to slow to 2.7% in 2018 partly due to liquidity shortages. The overall trend is below population growth and thus negative in per capita income terms, contributing to higher poverty rates.
Zimbabwe’s expansionary fiscal policy that started in 2016 has resulted in unsustainable fiscal deficits that widened from 8.5% in 2016 to 11.1% in 2017. The expansionary fiscal policy spilled over into the financial sector and resulted in cash shortages that weigh negatively on economic growth. After experiencing record hyperinflation in 2008, the country adopted in 2009 a multicurrency regime that ushered in macroeconomic stability and positive economic growth. Inflation stabilized; revenues and bank deposits recovered sharply. Zimbabwe’s fundamentals for economic growth and poverty reduction remain strong, and will continue to yield results, provided there is consensus around inclusive and competitive investment policies.
The political and economic crisis 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—have largely collapsed, and the Human Development Index (HDI) in 2011 stood at 173 out of 187 countries.
Social services have since recovered amid resurgent public and donor spending. Zimbabwe’s HDI ranking rose to 154 in 2016, 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 has recovered from 43.1 years in 2003 to 59 in 2015, compared with a high of 61.9 years in 1986; maternal mortality rate has declined from 960 deaths per 100,000 live births in 2010–2011, to an estimated 651 deaths in 2015; and under-five mortality has fallen from 94 per 1,000 in 2009 to 47 in 2015. Despite this, Zimbabwe missed a significant number of the Millennium Development Goals.
A lengthy isolation from the international community restricted aid flows and saw a build-up of arrears to multilateral and bilateral partners. However, the country has been making token payments on World Bank and other IFI arrears; and in 2015, a plan to clear arrears to facilitate access to much needed financing from international financial institutions was mooted. In 2018, a new Administration has laid emphasis on economic growth, and engagement with all countries and private sector. Zimbabwe is taking steps to realize its new goal of being “open for business” including amendments to the Indigenisation and Economic Empowerment Act to enable greater domestic investment and foreign direct investment inflows.
Zimbabwe has enormous potential given its generous endowment of natural resources, an existing stock of public infrastructure, and comparatively well skilled human resources. However, 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. The country is expected to go to polls this year between July 21 and August 21, 2018.

Last Updated: Apr 19, 2018
World Bank Group (WBG) assistance to Zimbabwe totaled $1.6 billion between 1980 and 2000. Since 2000, when direct lending was suspended because 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 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 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) supports the implementation of program-based budgeting across all central government line ministries by 2019, providing technical assistance to the Ministries of Health and Child Care and Primary and Secondary Education to strengthen teacher development and health sector planning.
A Capital Budgets TA ($4.3 million) supports the improvement of state-owned enterprise governance, public investment planning and management, and the review of the transport sector institutional framework.
Poverty Monitoring and Evaluation Technical Assistance ($ 3 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 ($ 2million) 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 ($ 10 million) aims to improve financial reporting, internal controls, fiscal transparency and accountability in government finances.
National Water Project ($ 10 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 19, 2018
Multi-Donor Trust Fund for Health Results Innovation: To date, an average of 47,000 women receive antenatal care services at supported facilities monthly, while more than 575,000 pregnant mothers have delivered in the facilities and more than 2.2 million children have received full immunization since program inception. 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 (RBF) districts, compared to those that had not yet started the approach.
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 and will end in June 2018.
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, the Ministry of Finance and Economic Planning led the pilot preparation of 2017 program budgets for three Ministries (Labor, Health and Education). For the 2018 National Budget, five more Line ministries were assisted to adopt program based budgeting.
The BEFSIP TA supported efforts to update 13 pieces of legislation and associated regulations and some of that legislation has being enacted into Law namely the Judicial Laws Amendment (Ease of Settling Commercial and Other Disputes) Act, Deeds Registries Amendment Act and the Movable Property Security Interests Act. The TA is currently working with Government on the development of an Investment Law.
Through the Procurement Project, the Government received support on the development of a Public Procurement and Disposal of Public Assets Act and related regulations. The Act which became effective on January 1, 2018 established the new Procurement Regulatory Authority of Zimbabwe.
ZIMREF (see PARTNERS) also provided support to the government in the drafting of the Public Entities Corporate Governance Bill that is currently undergoing parliamentary processes. The Bill enhances corporate governance, transparency and accountability clearing the way for improved performance in public entities.
The second Zimbabwe Economic Update (ZEU): The State in the Economy, provides a perspective on the macroeconomic issues facing the nation, and focuses on key developments in the education and local government sector. An analysis of the fiscal space options in the health sector in Zimbabwe was carried out to identify constraints and potential sources of fiscal space for health during the period of the National Health Strategy 2016-2020.

Last Updated: Apr 19, 2018
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. 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’s contribution 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 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 19, 2018