World Bank Urges Zimbabwe to Maintain 12 Months of Stability to Boost Debt Talks – The Zimbabwe Mail

The World Bank has called on Zimbabwe to achieve at least 12 months of uninterrupted macroeconomic stability to advance negotiations with international creditors over its $21 billion debt. The country, which has faced decades of economic challenges, including hyperinflation and debt defaults, is under pressure to stabilize its economy and resolve its debt crisis.

Victor Steenbergen, the World Bank’s senior country economist for Zimbabwe, emphasized the importance of economic stability during an economic summit in Victoria Falls hosted by the nation’s Treasury. “A stable economy for that period would do wonders in moving the dialogue forward and help in the short term with stabilization,” he told delegates. Steenbergen also stressed that fiscal policy could serve as the anchor for Zimbabwe’s macroeconomic stability.

Zimbabwe has been locked out of international capital markets since 1999 due to defaulting on its debt obligations, leading to ballooning interest payments. In 2022, the country enlisted African Development Bank President Akinwumi Adesina and former Mozambican President Joaquim Chissano to facilitate restructuring talks with creditors. The nation’s creditors include the World Bank, Paris Club, European Investment Bank, and the African Development Bank.

Steenbergen pointed out that a key driver of Zimbabwe’s macroeconomic instability is the country’s inability to service its external liabilities, leading to a need for broader restructuring. “The World Bank and others acknowledge that currently Zimbabwe’s debt situation is unsustainable,” he said, adding that the World Bank supports efforts to clear arrears and resolve the debt crisis through talks with traditional lenders such as the Paris Club and multilaterals, as well as new creditors.

Zimbabwe’s current economic situation remains precarious, with renewed exchange rate volatility. The Zimbabwe Gold (ZiG), the country’s sixth attempt at establishing a stable currency in 15 years, has been on a consistent losing streak against the U.S. dollar since its launch on April 8, depreciating by nearly 3% to 13.96. On the parallel market, the local currency is trading between 16 and 26 per U.S. dollar, according to ZimPriceCheck, a website tracking both official and unofficial rates.

In response to the currency’s slide, Reserve Bank of Zimbabwe Governor John Mushayavanhu has intensified efforts to crack down on the parallel market as part of the government’s broader strategy to stabilize the economy. However, the path to sustained economic recovery and debt resolution remains uncertain without significant structural reforms and stable macroeconomic conditions.

Source: Bloomberg

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