Zimbabwe could clear its arrears and rework $21 billion in debt that's kept it locked out of international capital markets for more than a quarter of a century if it implements fiscal reforms, the World Bank said.

"By adopting a bold set of fiscal reforms, it can turn the page on a prolonged history of macroeconomic instability, and set the foundations for a credible national budget that is efficient, able to manage unforeseen fiscal risks, and can ensure a stable and competitive currency," the World Bank said in its review of Zimbabwe's public finances on Wednesday. "In turn, this would open up the historic possibility of arrears' clearance and debt resolution, which would release major additional resources in concessional multilateral financing for public and private investments."

It would also put Zimbabwe on a high-growth path and a more stable macroeconomic trajectory, the Washington-based lender said.

The southern African nation defaulted on debt from lenders such as the World Bank, the Paris Club and the African Development Bank in 1999. In the past three years, it's made concerted efforts to exit default. It's enlisted AfDB President Akinwumi Adesina and former Mozambican President Joaquim Chissano to negotiate with creditors, hired Global Sovereign Advisory, a Paris-based consultancy, and started paying reparations to farmers and nations whose land it seized in the 2000s.

Changes the World Bank recommends include removing monetary and exchange-rate distortions to enable low and stable inflation, reducing the public-service wage bill by eliminating duplicate and redundant roles and doing away with value-added tax exemptions and zero-rating to increase revenues.

The nation introduced the ZiG, short for Zimbabwe Gold, in April last year to eventually replace the dollar in local transactions. Multiple previous attempts at creating a local unit have failed and led to spiralling inflation.

The central bank has introduced a plethora of steps to support the ZiG including curbing the money supply and forcing companies to price their products in the local currency, favouring the informal sector that sells goods at the higher unofficial exchange rate.

The World Bank also urged Zimbabwe to reverse the trend toward informalization by removing macroeconomic obstacles, high compliance burden for small businesses and taxing formal transactions.