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Zimbabwe to restructure debt, issue long-term securities to ease debt servicing costs – The Zimbabwe Mail

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HARARE – The Zimbabwean government plans to restructure the terms of some debts and issue long-term securities in a bid to reduce debt servicing costs, announced Minister of Finance, Economic Development and Investment Promotion Prof. Mthuli Ncube.

“Debt servicing, in the absence of long-term concessional external support and a preference for short-term securities by domestic investors, has increased debt servicing costs and created an unfavourable fiscal position that undermines support for social sectors and other development programmes,” Minister Ncube said in the 2025 Budget Strategy Paper.

Zimbabwe’s debt increased by 54.7% in nominal terms in 2023, reaching 96.7% of GDP, equivalent to US$21.2 billion, compared to 62.1% of GDP (US$13.7 billion) in 2021. The increase was mainly due to domestic debt.

Minister Ncube attributed the rapid increase in debt to the government’s assumption of legacy debts, external liabilities of the Reserve Bank of Zimbabwe, capitalization of the Mutapa Investment Fund and compensation to former farm owners. The national debt increased from $5.2 billion in 2022 to $8.1 billion in 2023, driven by the issuance of $2.84 billion in treasury bonds, including $924 million to repay RBZ debts and $1.92 billion to capitalize the Mutapa Investment Fund.

The African Development Bank (AfDB) in its latest Country Focus Report warned that Zimbabwe’s unsustainable debt poses a serious obstacle to the successful implementation of the National Development Strategy 1 (NDS1). To curb inflation risks, the AfDB recommended that Zimbabwe reduce its reliance on domestic borrowing. This could be achieved by eliminating the Reserve Bank’s quasi-fiscal operations and limiting its spending to budget allocations.

Prof. Ncube stressed that the government would accelerate the implementation of the arrears relief and debt settlement strategy for Zimbabwe through the Structured Dialogue Platform and the Engagement and Re-Engagement Programme to address the debt problem and ensure access to external long-term concessional financing.

The AfDB report estimates that Zimbabwe will face an annual financing gap of US$3.76 billion by 2030 to accelerate its economic development and catch up with more successful developing countries in other regions. This gap represents 13.4% of GDP for economic development by 2030 and 2.4% of GDP by 2063.

The report highlighted that improved access to finance is crucial to Zimbabwe’s economic development. It highlighted Zimbabwe’s urgent need to raise significant resources to accelerate and sustain economic development. The AfDB used a Sustainable Development Goals (SDG)-based methodology to calculate financing needs and gaps, emphasizing that linkages between different SDGs contribute to economic development. Some SDGs, more critical to economic development, require significant financial investments.

In summary, addressing financing needs and filling gaps in key sectors is essential for Zimbabwe to overcome shortfalls in the Sustainable Development Goals directly linked to economic development, the AfDB report said.