Zimbabwe needs a predictable fiscal and monetary policy to instill confidence in its currency – World Bank.

A senior World Bank official stated on Friday that Zimbabwe must increase the predictability of its monetary and fiscal policies to restore confidence in its declining value.

The World Bank’s Regional Vice President for Eastern and Southern Africa, Victoria Kwakwa, told Reuters in an interview that it may advance by straying from the central bank’s “quasi-fiscal operations”.

The International Monetary Fund stated last month that the central bank should cut back on its non-core operations, which have included printing money and borrowing to lend to the government, although she did not specify what those operations were.

With annual inflation at 47.6% and the Zimbabwean currency has lost over 60% of its value vs the US dollar thus far this year, the nation is still reeling from the memory of hyperinflation under longstanding former leader Robert Mugabe.

“That’s at the heart of the problem, the fact that there hasn’t been confidence,” Kwakwa stated. “And every time people get (the currency), they try to get rid of it to get something else and so it’s constantly losing value.”

After ten years of dollarization, the local currency was reintroduced in 2019, but it quickly lost value, leading the authorities to approve the use of foreign currencies in domestic transactions. 

The finance ministry and central bank announced last month that they were working on ways to stabilize the value of the currency and that they were thinking about tying the exchange rate to the price of gold among other things.

“Policy predictability… the improvements that are being made moving away from quasi-fiscal operations, all of that will contribute to building greater confidence,” Kwakwa stated.

According to her, the World Bank is “committed” to the ongoing process that Zimbabwe has been going through since 2022 to pay off billions of dollars in arrears to the organization and other foreign lenders. 

Kwakwa, meantime, expressed her “delight” at the news that China and India had reached debt restructuring deals with Zambia. The President of Zambia had announced the accords last week, raising optimism that Zambia would be on the verge of exiting its more than three-year default.

“Now that the formal creditors have been resolved, the government can concentrate more on settling with the business creditors. And we’re hoping that will happen shortly as well,” she stated.