situation report

Zimbabwe: African Development Bank Considers Financial Package for Zimbabwe

2 MINS READJun 17, 2019 | 19:40 GMT

What Happened: The African Development Bank is considering a financial aid package for Zimbabwe, The Herald reported June 17, citing the bank's director for southern Africa. The move has allegedly been inspired by 2018 Zimbabwean plans for structural economic reform and a recent International Monetary Fund program backing those plans. The support package could provide funding for several projects before the end of the year and offer Zimbabwe a direct line of credit in the next year. But before any package could be finalized, the African Development Bank would need to establish a plan for Zimbabwe, which already owes it $605 million, to repay its debt.

Why it Matters: Any African Development Bank funding would most likely be intended to help achieve long-term goals rather than as patches for immediate economic problems. While long-term pro-business policies and internationally supported plans could make a positive impact, Zimbabwe faces rising prices and worsening exchange rates, threatening access to food and other commodities. How well Zimbabwe can weather the short-term instability produced by continued economic decline remains unclear.

Background/Context: May figures showed Zimbabwe's highest inflation in 10 years, with an annual rate of 97.85 percent, while a collapse in prices for tobacco, exports of which make up over a quarter of the country's foreign currency sources, is hampering currency flows. Recent news suggests that tobacco prices are rebounding, but 70 percent of its crop already has been sold. The Zimbabwean government, meanwhile, appears to be preparing for a more sustained crackdown against potential unrest given recent reports of large orders of arms and ammunition destined for the country's police.

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