KEY POINTS
- Zimbabwe needs at least 12 months of macroeconomic stability to advance debt talks with international creditors.
- The nation owes $21 billion to institutions like the World Bank, the Paris Club, and the African Development Bank.
- According to the World Bank, a stable economy would boost debt restructuring efforts.
Zimbabwe requires at least 12 months of uninterrupted economic stability to help advance debt discussions with international creditors, according to the World Bank.
The nation, currently burdened with a $21 billion debt, must stabilize its economy to facilitate restructuring talks, said Victor Steenbergen, Senior Country Economist for Zimbabwe at the World Bank.
Speaking at an economic summit hosted by Zimbabwe’s Treasury in Victoria Falls, Steenbergen emphasized that a stable fiscal policy could be the key to restoring confidence and moving debt discussions forward.
According to New Zimbabwe, Steenbergen stressed that economic stability would benefit the nation in the long term and in the immediate future, particularly as Zimbabwe deals with macroeconomic challenges. “Having a stable economy for at least 12 months would do wonders in moving the dialog forward,” he said, adding that fiscal policy could anchor macroeconomic stability.
Zimbabwe has faced multiple economic crises, marked by hyperinflation, currency instability, and a history of debt default since 1999. In recent years, the country has been unable to meet its debt obligations, causing interest payments to spiral out of control.
In 2022, Zimbabwe sought assistance from African Development Bank President Akinwumi Adesina and former Mozambique President Joaquim Chissano to lead restructuring discussions with international creditors, which include the World Bank, Paris Club, and the African Development Bank.
The need for broader debt restructuring
Steenbergen highlighted the critical challenge Zimbabwe faces in meeting its external liabilities, which has contributed to the nation’s economic instability. “There is a need for broader restructuring,” he said. “The World Bank and other creditors acknowledge that Zimbabwe’s debt situation is unsustainable.”
Despite the challenges, the World Bank expressed support for Zimbabwe’s efforts to clear arrears and engage in debt resolution talks with traditional lenders, including multilateral institutions and new creditors.
The path to debt sustainability, however, hinges on economic reforms that would allow Zimbabwe to return to the international capital markets.
Currency struggles add to economic woes
Zimbabwe is currently grappling with renewed currency instability. The ZiG, short for Zimbabwe Gold, is the country’s sixth attempt at establishing a stable currency in the past 15 years.
Since its launch in April, the ZiG has seen its value fall by nearly 3 percent against the US dollar, trading at 13.96 to the dollar. On the parallel market, the local currency trades at rates between 16 and 26 to the dollar, according to ZimPriceCheck.
The Reserve Bank of Zimbabwe has intensified its efforts to clamp down on the parallel market as it struggles to stabilize the currency. John Mushayavanhu, the central bank governor, is focused on curbing the currency’s decline as part of a broader strategy to restore macroeconomic stability.
The World Bank’s insistence on economic stability aligns with Zimbabwe’s need to address its fiscal challenges, particularly as it seeks to resolve its long-standing debt crisis. Maintaining stability in both the currency and fiscal policies could prove critical in advancing discussions with international creditors and rebuilding the country’s economy.
