- Zimbabwe hosted creditors, partners, and finance executives to discuss an ambitious move to pay off $12.7 billion in foreign debt.
- Zimbabwe, once a regional breadbasket but now struggling to feed its people, must get back on track with bilateral creditors to access finance.
- Zimbabwe aims eventually to again tap international capital markets.
Zimbabwe debt repayment plan
In a long-anticipated move, Zimbabwe’s president met with creditors and financial executives on Monday in Harare to discuss ambitious plans to pay off $12.7 billion in foreign debt and get the country back on track to access international capital markets.
With a debt-to-GDP ratio of 97 per cent, Zimbabwe’s total public debt as of August 2024 was projected to be around $21 billion, limiting the nation’s financial ability to meet its development demands. Out of the $21 billion, $12.3 billion in foreign debt is owed to multilateral and bilateral creditors.
Development partners, including the World Bank, the International Monetary Fund, the European Union, the United Nations Development Programme, the diplomatic community, representatives from the private sector, farmers’ organisations, civil society groups, and the media, attended the meeting.
Launched in December 2022 under the Structured Dialogue Platform, this is the sixth conference between Zimbabwe and its creditors aimed at addressing the nation’s crippling debt and arrears accumulation over more than 20 years.
The South African nation’s debt burden is 81 per cent of GDP, and paying it off will be no easy task for a country that has suffered through hyperinflation and failed attempts at new currency regimes on more than one occasion in the last few decades.
“Zimbabwe is negotiating a Staff Monitored Program (SMP) with the International Monetary Fund,” President Emmerson Mnangagwa announced during the conference.
According to Akinwumi Adesina, president of the African Development Bank (AfDB), obtaining an SMP will pave the way for necessary policy reforms, who spoke at the conference.
He said, “That is the key,” and that the AfDB was prepared to provide financial help to Zimbabwe to protect the economy from any damage reforms might cause.
According to Adesina, the African Development Bank (AfDB) has a special fund that might be used to assist pay down Zimbabwe’s debt. He did not provide any figures.
Once Zimbabwe obtains bridge financing pledges from lenders to assist in clearing the arrears, timelines would become clear, according to Finance Minister Mthuli Ncube, who stated this would happen by mid-2025.
Since the economy cannot obtain funds from the IMF, the lender of last resort, analysts argue that paying down arrears is crucial.
“The issue of arrears is a major albatross around our neck. Once the arrears are cleared, borrowing will be cheaper and easier to attract investment,” said Prosper Chitambara, a Harare-based independent economist.
Unsustainable Predicament
Zimbabwe, once a regional breadbasket but now struggling to feed its people, must get back on track with bilateral creditors to access finance. It is also vital to settle arrears with the AfDB, the World Bank, and the European Investment Bank.
An IMF spokesperson said, “The IMF is currently precluded from providing financial support to Zimbabwe” due to an unsustainable debt situation and external arrears.
Neither financial aid nor approval by the Fund’s executive board are prerequisites for the IMF SMP that Zimbabwe is aiming for.
On the other hand, Zimbabwean authorities claim that doing so would show that the country is returning to sensible economic policy. Last month, the administration missed a second deadline and its first target of having an SMP in place by April. Budget preparation and other technical support have been the extent of the IMF’s involvement.
Debt Default Risks
Since 2020, Zambia and Chad have finalised debt overhauls; the United Nations predicts 24 of Africa’s 35 low-income nations are vulnerable to debt crises. Ethiopia is under restructuring, as Ghana is finishing off its own debt overhaul.
But Zimbabwe is not a typical default. A 2023 government projection shows that whereas 45 per cent of Zimbabwe’s burden is outstanding debt, the remaining balance is arrears and fines.
Ahead of the summit, Ncube noted that two companies, Global Sovereign Advisory Company, and legal firm Kepler-Karst, are being paid for by Africa Legal Support, an AfDB facility helping nations manage debt crises, to assist and advise the government.
Ncube indicated that Zimbabwe has only been paying nominal sums to debtors—including 16 bilateral creditors—but provided no additional information.
