HARARE – The Zimbabwean government plans to restructure the terms and conditions of certain debts and issue long-term securities in an effort to reduce the cost of debt servicing, announced Finance, Economic Development, and Investment Promotion Minister Prof. Mthuli Ncube.
“Servicing of the debt, in the absence of long-term concessional external support and preference for short-term paper by domestic investors, has increased debt servicing costs and created an unfavourable fiscal position that undermines support for the social sectors and other developmental programs,” said Minister Ncube in the 2025 Budget Strategy Paper.
Zimbabwe’s debt surged by 54.7% in nominal terms during 2023, reaching 96.7% of GDP, equivalent to US$21.2 billion, up from 62.1% of GDP (US$13.7 billion) in 2021. This increase was primarily driven by domestic debt.
Minister Ncube attributed the rapid debt growth to the government’s takeover of legacy debts, the Reserve Bank of Zimbabwe’s external liabilities, the capitalization of the Mutapa Investment Fund, and the compensation of former farm owners. Domestic debt rose from US$5.2 billion in 2022 to US$8.1 billion in 2023, fueled by US$2.84 billion in Treasury bond issuance, including US$924 million to clear legacy RBZ debts and US$1.92 billion to capitalize the Mutapa Investment Fund.
The African Development Bank (AfDB), in its recent Country Focus Report, warned that Zimbabwe’s unsustainable debt burden poses a significant obstacle to the successful implementation of the country’s National Development Strategy 1 (NDS1). To curb inflation risks, AfDB recommended that Zimbabwe reduce its reliance on domestic borrowing. This could be achieved by eliminating the Reserve Bank’s quasi-fiscal operations and restricting its spending to allocated budget funds.
Prof. Ncube emphasized that the government would expedite the Zimbabwe Arrears Clearance and Debt Resolution Strategy through the Structured Dialogue Platform and the Engagement and Re-Engagement agenda to address the debt burden and secure access to external long-term concessional funding.
The AfDB report estimates that Zimbabwe faces an annual financing gap of US$3.76 billion by 2030 to accelerate its economic development and match more successful developing countries from 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 better access to finance is crucial for Zimbabwe’s economic development. It stressed the urgency for Zimbabwe to raise significant resources to expedite economic development and maintain its pace. The AfDB used a method based on the Sustainable Development Goals (SDGs) to calculate the financing needs and gaps, emphasizing that interlinkages between different SDGs contribute to economic development. Certain SDGs, more critical for economic development, require substantial financial investments.
In conclusion, addressing the financing needs and gaps in key sectors is essential for Zimbabwe to overcome its shortcomings in SDGs directly linked to economic development, the AfDB report stated.