World Bank urges Zimbabwe to turn stability into jobs

THE World Bank has urged Zimbabwe to use recent macroeconomic stability to accelerate structural reforms, attract private investment and create up to 230 000 additional jobs by 2040, warning that stronger economic growth will not automatically translate into improved livelihoods.

The call, contained in the bank's latest assessment of Zimbabwe, comes as the country faces a critical test of whether lower inflation and improved fiscal discipline can be translated into productive employment, higher incomes and a more competitive economy.

The World Bank identified four key priorities for Zimbabwe: sustaining macroeconomic stability and resolving arrears, improving foundational infrastructure, strengthening the regulatory environment and increasing private-sector investment.

Local-currency inflation fell into single digits this year for the first time since 1997, while real GDP growth averaged nearly six percent between 2021 and 2025.

However, about 80 percent of Zimbabweans remain in the informal economy, where median monthly earnings are around US$130, while almost half of the population lives below the international poverty line.

The bank noted that much of the movement of labour out of agriculture had been into low-productivity retail and informal services rather than formal manufacturing or higher-value sectors.

The World Bank said Zimbabwe's next phase of growth should therefore be assessed not simply through headline GDP figures, but by whether the economy creates conditions for businesses to invest, expand and employ more people.

The bank said preserving recent macroeconomic gains while making progress on debt and arrears should be the first priority.

"The first priority is to preserve the macroeconomic gains while making progress on debt and arrears resolution," it said.

The return of lower inflation provides an opportunity to restore confidence in the currency, improve investment planning and reduce the defensive behaviour that has characterised much of the private sector.

However, the bank warned that stability would remain fragile without continued fiscal discipline and a credible path towards resolving external arrears.

Progress on arrears could help Zimbabwe regain access to concessional external financing while strengthening confidence in the country's broader reform programme.

The challenge, it said, was to make economic stability durable enough for businesses to plan and invest beyond the short term.

The World Bank also identified foundational infrastructure, particularly electricity, as critical to Zimbabwe's economic transformation.

It estimates that power shortages cost the economy about 6.1 percent of GDP annually, representing a significant constraint on industrialisation, exports and formal job creation.

For manufacturers, unreliable electricity increases operating costs, while mining companies face production constraints. In agriculture, inadequate irrigation leaves output heavily exposed to rainfall.

Weak transport corridors also increase the cost of moving goods to regional and international markets.

The bank said investment in power generation, grid reliability, transport and irrigation should therefore be viewed as an economy-wide competitiveness strategy rather than isolated infrastructure projects.

Without these foundations, Zimbabwe risks remaining trapped in an economy where workers move into low-productivity activities instead of sectors capable of generating higher wages.

The World Bank said Zimbabwe's private sector also needs a regulatory environment that makes it easier for entrepreneurs to establish, formalise and expand businesses.

Business permits, administrative fees, cross-border procedures and an unpredictable tax environment can impose significant costs, particularly on smaller enterprises.

"When compliance is expensive or uncertain, businesses have little incentive to formalise, expand or hire workers. A simpler regulatory regime would allow firms to devote more capital and management time to growth," the bank said.

It added that faster border procedures would strengthen trade, while clearer tax rules would improve investment planning.

The objective, according to the bank, should be to make formalisation economically attractive rather than simply administratively compulsory.

The World Bank said Zimbabwe's development ambitions could not be financed by the public sector alone.

Fiscal constraints, debt challenges and competing social needs mean private capital must become a much larger source of financing for productive capacity.

"Investors have choices, and capital will not flow at scale without confidence in the institutions that protect it," the bank said.

It highlighted stronger land tenure, more effective commercial justice, deeper financial markets, expanded access to credit and greater regulatory certainty for foreign investors as important reforms.

Such measures, it said, would determine whether Zimbabwe can attract investment into manufacturing, infrastructure, agriculture, mining services and other higher-value sectors.

The World Bank estimates that, on its current trajectory, Zimbabwe will record average growth of about four percent through 2030, potentially delaying the country's ambition of attaining upper-middle-income status until 2036.

Accelerated structural reforms could, however, increase real GDP by an additional 10.7 percent by 2030 and 26.9 percent by 2040 compared with the baseline.

The reforms could also support up to 230 000 additional jobs and increase real worker earnings by more than 30 percent.

The projections strengthen the case for reform, but the more difficult task now lies in implementation.

For Zimbabwe, the challenge is no longer simply achieving macroeconomic stability, but using that stability to build an economy capable of attracting investment, creating productive jobs and delivering sustained improvements in household incomes.