
HARARE – President Emmerson Mnangagwa’s administration is undertaking a critical restructuring of Treasury Bonds (TBs) maturing this quarter and beyond, as it faces escalating settlement costs and the looming threat of default, The Zimbabwe Independent reports.
Official documents reveal that the government is grappling with nearly US$740 million in forex-indexed, interest-bearing TBs set to mature between 2025 and 2034. According to the Zimbabwe Public Debt Management Office (ZPDMO), these securities contribute to a debt portfolio that accounts for 59.7% of the country’s gross domestic product (GDP).
Mounting Debt and Fiscal Strains
“The profile of outstanding US dollar-denominated TBs from the last quarter of 2024 through to 2034 reflects significant maturities of US$177 million scheduled for the last quarter of 2024, followed by other substantial maturities of US$738 million during 2025,” the ZPDMO stated in a recent analysis.
This brings the total value of TBs under restructuring to about US$915 million. The ZPDMO confirmed that the government is restructuring the bonds to alleviate payment pressures and reduce debt servicing costs to sustainable levels.
“The restructuring process is critical in enhancing fiscal sustainability and ensuring that government can meet its debt obligations without compromising public service delivery and economic growth,” the office said.
Finance Minister Mthuli Ncube hinted at these measures in August, acknowledging the need to restructure debts to address fiscal challenges. November’s implementation of significant spending cuts, including curbing state executives’ international trips, underscores the gravity of the situation.
Immediate Pressures
Data from the ZPDMO shows that while the final maturities of TBs extend to 2034, immediate pressures include US$177 million due this quarter. This is compounded by a 43% currency depreciation on September 27, which sent shockwaves through the economy, exacerbating fiscal pressures.
During the first nine months of 2024, the Treasury repaid ZiG52.7 billion in principal for domestic debt and fulfilled coupon obligations amounting to ZiG815 million. In the same period, US$54.4 million was paid for blocked funds obligations.
External debt, which stood at US$12.3 billion as of September 2024, includes US$6.3 billion owed to bilateral creditors and US$3.2 billion to multilateral institutions such as the African Development Bank, the World Bank, and the European Investment Bank. Penalties and arrears account for 84.4% of multilateral debt.
Asian Influence in Zimbabwe’s Debt Landscape
Asian lenders have become significant players in Zimbabwe’s debt profile. The China Exim Bank received US$14 million in debt servicing during the first nine months of 2024, while other Chinese institutions like Sinosure received US$4 million. These funds are tied to major infrastructure projects, including the Hwange Thermal Power Station and the Robert Gabriel Mugabe International Airport.
State-owned enterprises, which often benefit from state-guaranteed loans, have struggled to meet repayment obligations, further straining Treasury’s finances. Debts to Asian lenders, including Bank Negara Malaysia, illustrate the complexity of Zimbabwe’s financial commitments under the 2021 Blocked Funds Finance Act.
The Road Ahead
Experts suggest that the restructuring, which involves extending terms, tweaking interest rates, and reducing payment amounts, is essential to avoid insolvency and restore fiscal stability. However, the sustainability of these measures remains uncertain in the face of persistent economic and external pressures.
Tapiwa Sibanda, head of strategy at South Africa-based Trade Winds, noted, “Debt rescheduling can help borrowers avoid insolvency or defaults, but the success of such measures depends on broader fiscal discipline and external support.”
The restructuring highlights the government’s effort to address Zimbabwe’s economic challenges. However, the nation’s economic stability remains precarious as it navigates the complex interplay of debt management, fiscal austerity, and exchange rate volatility.