AfDB cuts Zimbabwe’s 2024 growth forecast, urges focus on currency stability

Downgrade: President Mnangagwa with AfDB president Adesina

The African Development Bank expects the Zimbabwe economy to grow by only 2% in 2024, 1.6 percentage points lower than its previous forecast, due to a combination of drought, weak commodity prices and debt.

In its new Africa outlook report released Thursday, the bank says Zimbabwe’s GDP grew by 6.1% in 2022 and by 5% in 2023, but will be hit by lower agriculture output caused by the El Nino drought.

“The downside risks are elevated due to drought caused by El Niño weather patterns that has affected the agriculture sector, while unstable international com­modity prices pose further risks to the mining sector,” AfDB says. It projects inflation in Zimbabwe to average 24.9% in 2024 “as the exchange rate stabilises”.

The government expects the economy to grow by 3.5% in 2024, although Finance Minister Mthuli Ncube has said this may be lowered as the drought’s impact has been worse than expected. According to the AfDB, the slowdown in global economic growth would be a major risk to the outlook in Zimbabwe, and the country needs to focus on stabilising the currency if it is to restore stability.

“Zimbabwe expects to adopt a Staff Monitored Program (SMP) of the IMF in second half of 2024. Maintaining ZiG exchange rate stability and eliminating the quasi-fiscal operations of the RBZ and transferring all its liabilities to the Treasury could underpin macroeconomic stability,” the bank says.

Growth in Southern Africa is projected to speed up slightly from an estimated 1.6% in 2023 to 2.2% in 2024 and 2.7% in 2025, with an upgrade of 0.1 percentage point for both periods over the January 2024 forecast.

In its report, the AfDB, which is leading efforts for an arrears clearance deal for Zimbabwe, has called for reforms of the global financial system to help economies such as Zimbabwe emerge from debt distress.

“For instance, multilateral external arrears in many countries have reduced access to concessional financing from internal financial institutions, with the normalization of relationship in many cases subject to arrears clearance before a country can regain access to new financing,” AfDB says.

“In a country like Zimbabwe, this has turned a sol­vency problem into a liquidity crisis, resulting in exchange rate pressures and hyperinflation, high­lighting the need for reforms of the international financial architecture to provide more flexibility for countries that have accumulated arrears and are in dire need of emergency financing.”