Arrears clearance and debt resolution rank among critical issues Zimbabwe should address to guarantee sustained economic growth, according to the World Bank’s latest report.
Full resolution of the issue would not only drive growth but also help create an environment attractive to investors, the multilateral lender said.
“Zimbabwe’s economic trajectory hinges on resolving macroeconomic challenges, particularly through arrears clearance and prudent debt management,” the bank noted.
“These measures are pivotal in redirecting resources to high-productivity sectors and catalysing private sector investment, which are imperative for sustained economic expansion.”
High inflation and exchange rate volatility have hampered sustainable economic growth, limiting much-needed private investment and diminishing resources.
“The accumulation of public debt arrears has limited Zimbabwe’s access to external financing and kept public investment at low levels, further negatively impacting growth.
“As such, addressing price and exchange rate volatility and public debt arrears is a necessary condition for economic growth and job creation,” the World Bank added.
Economic analysts share similar sentiments, saying addressing the challenges head-on is a fundamental prerequisite for fostering an environment conducive to robust economic growth.
“Clearing public debt arrears is not just about financial stability, it is about unlocking new avenues for investment and development,” said Mr Peter Kaunda, chief operations officer of Travis and Denham, an investment firm.
“Investors are eagerly awaiting these reforms, which would mitigate risk perceptions and stimulate substantial inflows of both public and private capital.”
As of January 2025, Zimbabwe’s total public debt was estimated at US$21 billion, representing a debt-to-GDP ratio of 97 percent, leaving the country with limited financial capacity for its development needs.
Of the US$21 billion, external debt owed to bilateral and multilateral creditors totalled US$12,3 billion. Zimbabwe’s biggest multilateral creditors include the World Bank, which is owed US$1,5 billion, the African Development Bank Group US$760 million, and the European Investment Bank US$427 million.
The country’s domestic debt stands at US$8,7 billion.
To address the debt issue, the Government established the Structured Dialogue Platform, a collaborative effort between Zimbabwe and international financial institutions to resolve the country’s debt situation.
This platform is already working to chart a course towards comprehensive debt restructuring to reopen access to cheaper and long term international financing.
“Sufficient progress across the three pillars of the Structured Dialogue Platform would allow Zimbabwe to fully re-engage with multilateral financial institutions and provide significant amounts of new funding to Zimbabwe.”
After nearly two years of dialogue with development partners, Zimbabwe is looking to accelerate the arrears clearance and debt resolution process by working with the International Monetary Fund (IMF) under a staff-monitored programme (SMP).
The SMP falls under the economic reforms Zimbabwe is undertaking as part of the process to clear its US$21 billion public debt and arrears.
Addressing the sixth Structural Dialogue Platform in November 2024, President Mnangagwa expressed support for the IMF programme and called for provisional financial support to protect vulnerable groups of the population that will be negatively affected.
Zimbabwe has not been able to access funding from the multilateral lender since the turn of the century due to its arrears position.
It cannot also get concessional loans from other multilateral lenders due to the pari passu rule, a principle which requires the lenders to treat defaulters the same way.
“In this regard, the protection of the vulnerable groups, through effective social protection programmes is of critical importance to my Government,” President Mnangagwa told creditors, development partners, private sector players, civil society organisations and farmers’ organisations at the high-level dialogue.
African Development Bank President Dr Akinwumi Adesina termed the IMF staff programme “a significant milestone towards concretising the arrears clearance and debt resolution”.
“I would like to urge here that our collective efforts will be critical to ensure that this is a wet-SMP (a supported staff monitored programme) that will provide fiscal space for the country to implement needed reforms and protect the vulnerable populations,” said Dr Adesina, who was appointed by President Mnangagwa the Champion of the debt resolution process.
Dr Prosper Chitambara, an economist noted, “The dialogue has laid out a clear roadmap for Zimbabwe to address its external debt obligations methodically.
“Successful implementation will not only restore Zimbabwe’s creditworthiness but also catalyse significant injections of concessional financing, critical for achieving sustainable growth targets.”
Central to this strategy is Zimbabwe’s Vision 2030, a series of economic milestones the country must achieve through inclusive economic transformation and poverty alleviation.
With arrears clearance and debt resolution at its core, Vision 2030 envisions a future where robust public and private investments drive tangible socio-economic progress across all sectors.
“Vision 2030 hinges on our ability to secure affordable external credit lines and stimulate domestic investment,” Mr Kaunda said.
“Through clearing arrears and resolving debt issues, we are positioning Zimbabwe as a magnet for global capital, ushering in an era of unprecedented growth and prosperity.” – Herald
