Zimbabwe Can Be Middle-Income State in a Decade, World Bank Says

(Bloomberg) -- Zimbabwe, where a new president was elected this week, could become a middle-income country within a decade, according to the World Bank's vice president for Africa.

“It's a country with huge potential,” Hafez Ghanem said in an interview Thursday in Nigeria's capital, Abuja. Zimbabwe “can easily become an upper middle-income country in a very short time. Depending on the type of programs, five to ten years. Zimbabwe has some of the most educated people on our continent, so we have human capital and we have natural resources.”

The World Bank estimates current gross domestic product in the southern African nation at about $17.8 billion, about a third of that of Tanzania.

Emmerson Mnangagwa, 75, was declared the winner of Monday's election in a victory overshadowed by deadly protests and opposition allegations of rigging. He replaces Robert Mugabe, who was forced to quit in November after 37 years in office, leaving a broken economy with a collapsed currency, and a treasury unable to pay its debts or take out new ones. Mnangagwa in a Jan. 18 interview said the nation is probably 16 to 17 years behind where it ought to be as a result of economic isolation.

As of May this year, Zimbabwe had credit arrears of about $1.7 billion to the African Development Bank and the World Bank. The Finance Ministry forecast total debt of $14.5 billion in the 2018 budget.

Clear Debt

The government will need to attract investment, deal with debt and return to the international financial system to recover and grow, according to Ghanem.

The nation could seek bridge financing, where the government can borrow from bilateral arrangements to cover arrears, he said. “The expected benefits from rejoining the international financial community is higher than the cost of these loans.”

Another option would be to seek relief under the International Monetary Fund and World Bank's heavily indebted poor countries initiative, although it is a longer process longer. Somalia took the so-called HIPC route, and the World Bank has started operating in the country, according to Ghanem. “We are eager to support Zimbabwe,” he said.

The government will need to try and secure grants, loans or a commercial bridge loan to clear arrears and pave the way for debt relief, Christopher Dielmann at Exotix Capital said Friday in an emailed note. “After this process is complete, the country should be in a much stronger position to attract capital inflows from international investors, who have already shown a growing interest in the country's potential.”

To contact the reporter on this story: David Malingha Doya in Abuja at dmalingha@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net, Sophie Mongalvy, Ana Monteiro

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