Zimbabwe’s recent macroeconomic trajectory has surprised many observers. Several years ago, projections that the country could rank among the region’s fastest-growing economies were met with considerable scepticism, understandably so, given the country’s turbulent history of hyperinflation, currency collapse, and political instability. Yet the data has largely vindicated that outlook.
By Brighton Musonza
According to the IMF’s most recent Article IV consultation and regional economic outlook, Zimbabwe’s economy expanded by approximately 7.5% in 2025, outpacing the government’s own estimate of 6.6% and comfortably exceeding the continental average of 4.5%. The Fund projects a moderation to 5% growth in 2026, still ahead of the projected Sub-Saharan African average of 4.3% — a figure the IMF itself cautions is clouded by “significant risks amid high global uncertainty.”
These are not trivial numbers. For a country that spent much of the 2000s in economic freefall and the 2010s in a prolonged, painful stabilisation effort, headline growth of this magnitude represents a meaningful recovery. The IMF credits improving fiscal discipline, expansion in agriculture — bolstered by favourable rainfall cycles — and continued output growth in the mining sector, particularly gold and lithium, as the primary engines of this performance. The recently announced ten-month Staff-Monitored Programme (SMP) adds a further layer of institutional credibility. While an SMP falls short of a full financing arrangement, it signals that Zimbabwe is taking seriously the conditionalities necessary to re-engage with international creditors and pursue structured debt relief — a prerequisite for accessing long-term concessional financing and normalising its relationship with multilateral institutions.
Yet growth alone tells an incomplete story, and in Zimbabwe’s case, the gap between macroeconomic performance and lived economic reality is stark and structurally embedded.
The Monetary Trap
The most consequential constraint on Zimbabwe’s development model is its de facto dollarisation. Following the catastrophic hyperinflation of 2007–2008 — during which the central bank printed money so aggressively that the country ultimately abandoned its own currency — Zimbabwe adopted a multi-currency regime dominated by the United States dollar. The ZiG (Zimbabwe Gold), introduced in 2024 as the latest iteration of a domestic currency, has struggled to gain traction and confidence among the population and the business community.
The practical consequence is that Zimbabwe operates much like a dollarised economy: monetary policy, in the conventional sense, is largely unavailable as a stabilisation or growth instrument. The Reserve Bank of Zimbabwe cannot meaningfully adjust interest rates to stimulate or cool aggregate demand, cannot engage in open market operations to manage domestic liquidity, and cannot deploy exchange rate flexibility to absorb external shocks or improve export competitiveness. This is not merely a theoretical limitation. In a region where trading partners such as Zambia, Mozambique, and Tanzania all operate with flexible exchange rate regimes, Zimbabwean exporters in sectors outside mining face a structural cost disadvantage. Their wage bills, rental costs, and domestic inputs are priced in dollars, while competitors can partially offset global commodity price swings or demand fluctuations through currency adjustment.
The literature on dollarisation is nuanced. There are genuine benefits: price stability, reduced transaction costs in a heavily import-dependent economy, and the discipline it imposes on fiscal policy by removing the option of inflationary financing. For Zimbabwe, which carries a deep collective memory of monetary trauma, the credibility anchoring function of dollarisation should not be underestimated. The problem is not dollarisation per se, but the absence of compensating institutional mechanisms — a robust fiscal stabilisation fund, for instance, or a well-functioning domestic capital market — that would otherwise provide macroeconomic buffers.
Capital Misallocation and the Real Estate Problem
A distinct but related structural weakness is the pattern of capital allocation that has emerged under these conditions. In the absence of productive investment outlets with predictable returns, and given the legacy of currency and policy risk, a disproportionate share of domestic savings and remittance flows — Zimbabwe’s diaspora remittances are estimated to exceed $1.5 billion annually — has been channelled into real estate. Property in Harare, Bulawayo, and secondary towns has experienced significant price appreciation, driven not primarily by housing demand fundamentals but by its role as a store of value and a hedge against macroeconomic uncertainty.
This is a well-documented phenomenon in emerging markets with shallow financial systems and histories of monetary instability. From parts of sub-Saharan Africa to post-Soviet Eastern Europe, capital flight into tangible, non-depreciating assets such as property tends to crowd out investment in manufacturing, agriculture, and services — precisely the sectors that generate employment, transfer productivity gains to workers, and create the backward and forward linkages that sustain inclusive growth. In Zimbabwe’s case, the manufacturing sector, which once accounted for nearly a quarter of GDP and made the country one of Africa’s most industrialised economies, has never recovered its pre-crisis scale. Capacity utilisation in industry remains well below potential, and the skills base that supported it has been substantially eroded by decades of emigration.
The macroeconomic data captures growth in aggregate output, much of it concentrated in capital-intensive mining and a recovering agricultural season, but does not capture the extent to which the growth dividend is being recycled into non-tradable asset inflation rather than productive expansion. This is not merely an efficiency problem; it is a distributional one. Real estate appreciation benefits asset holders, while the absence of industrial deepening constrains wage growth, formal employment creation, and the tax revenues that would fund public services.
Fiscal Space and the Debt Overhang
Zimbabwe’s public debt position adds a further dimension of complexity. The country carries significant arrears to bilateral and multilateral creditors accumulated over decades of economic mismanagement, and its exclusion from normal international capital markets has forced it to rely on expensive domestic financing and short-term credit arrangements. The SMP, if successfully implemented, could serve as a gateway to the Heavily Indebted Poor Countries (HIPC) framework or a structured arrears clearance mechanism, but these processes are lengthy, politically complex, and contingent on sustained policy credibility.
The IMF’s acknowledgement of “improving fiscal discipline” is encouraging, but it is worth contextualising. Zimbabwe’s fiscal position has improved largely through revenue buoyancy from commodity exports and an expansion of the domestic tax base, rather than through structural expenditure reform. Public wage pressures remain substantial, social infrastructure investment is chronically underfunded relative to need, and the government’s capacity to pursue countercyclical spending, investing in health, education, or social protection precisely when private sector activity is subdued — is severely constrained by its debt position and limited access to external financing.
Structural Transformation and the Productivity Question
Sustainable, poverty-reducing growth in a low-income country context requires structural transformation: the gradual reallocation of labour and capital from low-productivity activities to higher-productivity ones. In the classic development model, this involves the movement of workers from subsistence agriculture into manufacturing and modern services. Zimbabwe’s current growth model does not appear to be generating this transition at scale. Agriculture contributes meaningfully to output in good rainfall years but remains predominantly smallholder-dominated, with limited mechanisation, fragmented land tenure arrangements, and constrained access to inputs and credit. Mining is growing but is capital rather than labour-intensive, and much of the value generated leaves the country through royalties and profit repatriation rather than being retained domestically.
The services sector — particularly informal trade, financial services, and telecommunications — provides livelihoods for a large portion of the urban workforce but is not delivering the productivity gains or formal employment with associated benefits and protections that would translate growth into genuine poverty reduction.
The IMF Programme: Promise and Limitations
The SMP announced for Zimbabwe is a technically modest instrument. It involves no disbursements, carries no balance of payments support, and offers no direct relief from the debt burden. What it provides is a structured monitoring framework — a credible signal that the government is meeting agreed macroeconomic benchmarks — which can in turn facilitate direct negotiations with bilateral creditors under the G20 Common Framework or similar mechanisms.
The significance of this should not be overstated or understated. For a government that has spent years in a credibility deficit with international financial institutions, sustained programme compliance — even under a staff-monitored rather than a fully funded arrangement — carries real value in terms of market signalling and diplomatic positioning. If Zimbabwe can demonstrate consistent adherence over the programme period, it materially improves the prospects for a structured debt resolution that would reduce debt service costs, free up fiscal space, and potentially unlock concessional financing for infrastructure and social investment.
But the conditionalities embedded in such programmes, typically centred on fiscal consolidation, revenue mobilisation, and public financial management reform, can, if poorly sequenced, reinforce the very demand compression that limits growth’s distributional benefits. The historical record of IMF-supported programmes in low-income countries with high informality, limited social protection systems, and fragile political economies is mixed at best. The challenge for Zimbabwean policymakers is to meet the programme benchmarks while protecting the fiscal space for human capital investment and productive public expenditure.
What Inclusive Growth Would Actually Require
The path from high headline growth to broadly shared prosperity in Zimbabwe’s specific context would require, at minimum, a coherent industrial policy capable of directing investment toward labour-intensive, tradable sectors; a credible domestic financial system that intermediates savings into productive investment rather than real estate; a resolution of the currency question that either makes the ZiG functional and trusted or accepts dollarisation while building fiscal buffers to compensate; structured debt relief that meaningfully reduces the government’s financing cost; and sustained investment in education and skills — particularly relevant given Zimbabwe’s historically high human capital base, now significantly depleted by emigration.
None of these is a quick fix. Several require external cooperation — from creditors, trading partners, and the international financial architecture — that is not solely within Zimbabwe’s control. Some, including the currency question, involve genuine trade-offs where reasonable economists disagree.
Conclusion
Zimbabwe’s return to the front ranks of African growth performers is real and should be recognised as such. The IMF’s engagement, however cautious, reflects a genuine assessment that the macroeconomic trajectory has improved. But the country faces a classic middle-income trap in miniature: growth that is real but structurally thin, disproportionately concentrated in sectors with limited employment multipliers, and filtered through an institutional and macroeconomic architecture that systematically prevents its translation into poverty reduction. The central task is not simply to sustain growth rates but to undertake the structural and institutional reforms that allow those growth rates to mean something for ordinary Zimbabweans. That is a harder problem — and one that the headline numbers, however encouraging, do not resolve.
