Zimbabwe is a lower-middle-income country with strong human and natural capital and significant growth potential. Building on its highly educated workforce, abundant natural resources, and recent advances in economic policy¡ªtogether with key structural and institutional reforms¡ªZimbabwe could achieve steady and rapid growth and move towards upper-middle-income country status, which the Government of Zimbabwe (GoZ) has targeted for 2030.
Yet, the country has historically been burdened with macroeconomic instability, in part because of fiscal pressures. In support, the World Bank¡¯s new helps to identify options for fiscal consolidation that can move Zimbabwe onto a more sustainable fiscal pathway. In turn, prudent fiscal policy will help to stabilize the macroeconomic environment by providing an anchor for price and exchange rate stability, bolstering economic growth and job creation.
´Ü¾±³¾²ú²¹²ú·É±ð¡¯²õ further shows that the country is highly competitive in a number of value chains in agriculture and agribusiness industries, as well as in tourism and the mining of energy transition minerals. 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.
´Ü¾±³¾²ú²¹²ú·É±ð¡¯²õ finds that Zimbabwe faces significant challenges from climate change, which will continue to impose high costs on the economy. The inability to finance development, climate adaptation, and mitigation leads to increased land degradation and less climate resilience. Zimbabwe can address these challenges by linking global value chains to its significant reserves of energy transition minerals.
Economic context
After several years of high growth (following the COVID-19 pandemic), growth declined to 2% in 2024 due to the El Ni?o-induced droughts, lower mining prices, and macroeconomic instability. Ongoing power shortages have contributed to decreased industrial growth and disrupted winter irrigation.
Inflationary pressures have moderated since the April 2024 introduction of the new Zimbabwe Gold (ZiG) currency, but the exchange rate continues to be under pressure (as evidenced by a sizeable devaluation in late September 2024). The currency volatility limits formal sector production and undermines companies' and individuals' planning.
Macroeconomic pressures also persist on the fiscal side. The transfer of Reserve Bank of ´Ü¾±³¾²ú²¹²ú·É±ð¡¯²õ external debt to the Treasury, together with increased capital spending in 2023, has resulted in steep increases in the Treasury¡¯s debt servicing costs. At the same time, the drought has increased fiscal pressures for drought-response and undermined tax collection. As such, fiscal consolidation and discipline are key to macroeconomic stability going forward.
Economic growth is projected to recover to about 6% in 2025 once the influences of the drought begin to wane¡ªespecially on agricultural production and hydropower generation¡ªand ongoing investment initiatives start to increase mining and manufacturing production. In the medium-term, the current account is expected to remain positive and improve, driven by increased mining activities for lithium and a recovery in gold production.
Key Developmental Challenges
Macroeconomic vulnerabilities and a challenging business environment raise the cost of doing business in Zimbabwe, increasing informality and limiting the pace of structural transformation. In 2024, El-Nino induced drought triggered a state of National Disaster, significantly affecting agriculture, an important sector of ´Ü¾±³¾²ú²¹²ú·É±ð¡¯²õ economy that largely depends on rainfed crops. The investment climate is further hampered by inadequate electricity supply, as the drought has resulted in power shortages at the Kariba hydro-power station.
Public debt remains high, unsustainable, and in distress, limiting access to international financing. Due to the accumulation of external arrears and legacy debts, total public debt reached $21.2 billion in 2023 (96.6% of GDP). Fiscal risks remain elevated due to wage bill pressures and borrowing on non-concessional terms. Persistent challenges in deficit financing have exerted pressure on the ZiG. To restore debt sustainability, there is need for increased domestic resource mobilization, fiscal consolidation, improved public debt management, growth-enhancing structural reforms, and the resolution of external arrears.
Poverty reduction has been constrained by structural factors, including macroeconomic volatility, dependence on low-productivity agriculture (combined with high correlation between weather shocks and agricultural production), low coverage of social assistance programs, and high inequality in income and human capital endowment.
Last Updated: Apr 11, 2025
