HARARE – Zimbabwe’s efforts to address its $21 billion debt burden are exerting increasing pressure on its already strained finances, according to African Development Bank (AfDB) President Akinwumi Adesina.
Speaking at a debt conference in Harare, according to Bloomberg, Adesina highlighted the fiscal strain arising from reforms aimed at securing a comprehensive debt revamp. As of December 2023, the Reserve Bank of Zimbabwe had transferred $3.66 billion in external debt to the Treasury.
“This new liability has put even greater pressure on the government’s fiscal space by increasing debt repayments from the national budget in the face of a weakened currency,” Adesina said, referencing a transcript posted on the AfDB’s website.
Zimbabwe’s Treasury recently announced spending cuts in response to a 43% devaluation of the local currency, the ZiG, against the US dollar in late September. The move came amid what officials described as a “substantial mismatch” between government revenue and expenditure.
The country’s efforts to re-engage with international lenders have been overseen by Adesina and former Mozambican President Joaquim Chissano, who were appointed as chief negotiators in 2022. Zimbabwe’s creditors include the World Bank, the Paris Club, the European Investment Bank, and the AfDB. In addition, the government has engaged advisory firms Global Sovereign Advisory and Kepler-Karst to assist with the restructuring process.
Despite the challenges, Adesina commended Zimbabwe for implementing “impressive reforms” to lay the groundwork for debt resolution. Key measures include scrapping multiple exchange rates, ending the Dutch foreign-exchange auction window, and introducing a market-driven currency system based on willing-buyer, willing-seller principles.
The International Monetary Fund (IMF) has played an integral role in these reforms, conducting four missions to Zimbabwe so far. According to Adesina, a January mission is planned to develop a framework for a staff-monitored program, which would mark a significant step toward arrears clearance and debt resolution.
Adesina expressed optimism about reaching a debt deal before his AfDB tenure concludes in August 2025. “These reforms are pivotal not only for debt restructuring but also for restoring confidence in Zimbabwe’s economic future,” he noted.
Zimbabwe has been excluded from international capital markets since 1999 due to debt arrears, a situation that has stymied economic growth. With reforms underway and negotiations intensifying, the government hopes to reintegrate into the global financial system and unlock new funding opportunities.
However, the road ahead is fraught with obstacles. The weakening local currency, rising inflation, and the heavy debt burden continue to strain the economy. Observers are closely watching how Zimbabwe balances domestic fiscal discipline with its international obligations as it strives to turn the corner on decades of economic isolation.
The stakes are high as Zimbabwe seeks to secure a sustainable debt solution while navigating the complexities of its economic recovery.