In its Creating Markets in Zimbabwe report released on Friday, the Washington-based lender noted that the southern African nation has limited access to external financing and is contending with low tax collection, a rapidly depreciating exchange rate and high inflation.
“Liberalisation of the foreign-exchange market, adoption of foreign-exchange surrender requirements and reform of the Reserve Bank of Zimbabwe quasi-fiscal operations are the most urgent measures to establish macroeconomic equilibrium,” it said. “Without such measures, efforts to tighten monetary and fiscal policy will not be effective.”
Zimbabwe experienced years of economic mismanagement that led to hyperinflation and the scrapping of its currency in 2009. While the Zimbabwe dollar was reintroduced a decade later, it is widely eschewed in favour of the greenback. The country has multiple exchange rates, with the Zimbabwean unit trading at a discount on the parallel market.
On 6 February, President Emmerson Mnangagwa said the government is considering “a structured currency,” but details on how it will work have yet to be released.
The government stopped servicing the loans it owes to international financial institutions more than two decades ago. The arrears it has accumulated on its external debt equated to 52% of its gross domestic product in 2022, up from 26% four years earlier, the World Bank said.
