Africa > Zimbabwe
The public sector debt stock and interest outlays, particularly related to the domestic debt, rose rapidly in Zimbabwe during the 1990s, suggesting that fiscal policy became unsustainable. The government’s efforts in recent years have reduced fiscal deficits and lowered the level of public debt relative to GDP. The fiscal stance has benefited, however, from other economic policies that themselves are unsustainable. Major policy adjustments will be required in order to address the serious economic imbalances, including high inflation, negative real interest rates, a chronic shortage of foreign exchange in the official market, the absence of productive investments, and negative real growth. As these adjustments are made, the real cost of borrowing will rise, and a tightening of the fiscal stance will be needed to dampen the rising debt-service costs and facilitate the achievement of fiscal sustainability over the medium term.
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