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Overview

  • Zimbabwe is facing an economic crisis, further worsened by COVID-19 (coronavirus) pandemic. In 2019, Zimbabwe was hit by severe drought and Cyclone Idai, that coupled with shortages of foreign currency led to double-digit contraction of agriculture, electricity, and water production and pushed more than half of the population into food insecurity. Policy missteps—lack of effective fiscal-monetary-forex policy coordination and significant quasi-fiscal activities by the Central Bank—undermined the de-dollarization effort and resulted in a rapid depreciation of the local currency and high inflationary pressures.   

    High inflation eroded disposable incomes of population and depressed domestic demand. Gross domestic product (GDP) is estimated to have contracted by 8.1% in 2019 and the recession is projected to continue in 2020 due to persistent climate shocks and domestic vulnerabilities worsened by COVID-19. The pandemic has negatively affected exports, tourism, and manufacturing, deepening the economic crisis and poverty. As uncertainty about the duration and severity of the virus spread remains high, GDP is expected to contract in 2020 between 5% under the baseline scenario and 10% in the low case scenario.    

    Inflation reached triple digit levels in 2019, and is projected to remain high in 2020 as COVID-19 disrupts production and trade. Inflation surged to 521% year-on-year in December 2019, fueled by a rapid exchange rate depreciation, poor harvests, and reduction of subsidies on fuel and electricity. Food prices increased by 725%, resulting in a severe loss of purchasing power for the poor. Continued local currency depreciation, disruption of production and trade as a result of COVID-19 are likely to fuel inflationary pressures in 2020.   

    The government introduced a new inflation rate in June 2020 based on blending US$ and ZWL$ (local currency) prices. The blended annual inflation rate stood at 457.2% in June 2020 while the unblended (usual) annual inflation rate stood at 737.3% down from 786% in May 2020. With limited access to external financing and growing humanitarian needs due to COVID-19 and persistent climate shocks, the government may resort to monetary financing, stoking further inflation.  

    Human Capital 

    Despite increases in social protection spending, including repayment of arrears on important social programs, most extremely poor citizens remained unprotected, and their numbers are rising.  Education and health spending budgets, which have a large salary component, were eroded by inflation, worsening human capital outcomes and jeopardizing opportunities for future generations. On the back of sizable financing needs and deteriorating revenue generation capacity, the pandemic has increased expenditure pressures. Efforts to scale up health care financing and provide social protection to urban beneficiaries who are most exposed to the lockdown are ongoing. As a result, the fiscal deficit is expected to widen to 5.6% of GDP.  

    Development Challenges  

    Poverty levels increased sharply in 2019 and are projected to worsen further in 2020. In 2019, the number of extreme poor is estimated to have reached 6.6 million, double the level in 2011. A substantial decline in agriculture production and high food prices increased food insecurity, with close to 50% of the population being food insecure in 2019. Extreme poverty reached 40% of the population in 2019, up from 33.4% in 2017, with urban poverty rising faster (from 4% to 10%) than rural poverty.  The poverty levels are projected to rise further in 2020 due to continuing economic contraction and loss of employment and income, exacerbated by the restrictions on mobility, inflationary pressures and drought conditions. The number of extreme poor is projected to increase from 6.6 million in 2019 to 7.6 million in 2020 under the baseline scenario and to eight million under the low case scenario.

    Last Updated: Aug 15, 2020

  • World Bank Group (WBG) assistance to Zimbabwe totaled $1.6 billion between 1980 and 2000. Since 2000, direct lending has been suspended because of non-payment of arrears.  

    Due to the arrears, the WBG is providing support to Zimbabwe and remains fully engaged in Zimbabwe through a number of trust funds (TFs), including the multi-donor Zimbabwe Reconstruction Fund (ZIMREF), its predecessor, the Multi-Donor Health Results Innovation Trust Fund- Global Financing Facility (HIRTF-GFF), the State and Peacebuilding Fund, and the Cooperation in International Waters. 

    The support has been 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 the country’s cyclone-affected people.  The project became effective in July 2019 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 and  results-based financing (RBF) approaches in the health sector ($53 million) to improve maternal and child health in both rural and urban areas. 

    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: Aug 15, 2020

  • Human Capital  

    The Health Results Innovation Global Financing Facility has helped:  

    • More than 800,000 women receive antenatal care services through at least one visit at supported facilities since inception 
    • More than 100,000 pregnant mothers have delivered in the facilities on an annual basis  
    • As of February 2020, the cumulative number of births attended by skilled health personnel for all participating rural and urban districts is over 870,000 and a total of 728,647 children completed the primary course on immunization since inception  
    • 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. 

    Technical and Analytical (TA) Work 

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

    • The introduction of program-based budgets by the Ministry of Finance and Economic Development. The program began in 2017 with three pilot ministries, and to date it has been scaled up the national budget being produced in PBB format. 
    • 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 enhance 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  
    • A 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. 
    • Through a public financial management 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 a water project, 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: Aug 15, 2020

  • 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 United Kingdom, 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 $18.2 million. Cordaid is the implementing partner. 

    Development partners also include the European Union, the African Union Development Bank, the Zimbabwe River Authority, and Embassy of Sweden, which are funding the Kariba Dam Rehabilitation Project.  

     

     

    Last Updated: Aug 15, 2020

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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
External Affairs Officer
(+263-4) 369-130/1
ckhuphe@worldbank.org
For project-related issues and complaints
zimbabwealert@worldbank.org