Zimbabwe is in debt distress, and the country has been looking for solutions on how to emerge from it.
The Ministry of Finance’s Public Debt Management Office has recently released a medium-term debt management strategy that has the latest data on the extent of the country’s debt crisis. It lays out how much we owe, who we owe, how much debt we have taken on over the past year, and how much is expected over the next few years.
Here are some of the key takeaways from the strategy paper on the state of Zimbabwe’s debt crisis.
How much do we owe?
The total Public and Publicly Guaranteed (PPG) debt in December 2021 was US$17.2 billion. This was made up of external debt of US$13.4 billion (77.9%) and domestic debt of US$3.8 billion (22.1%). This total public debt includes blocked funds of US$3.533 billion and an obligation of US$3.5 billion to compensate white former farmers for improvements on resettled land.
Not only does Zimbabwe owe principal amounts, but the country also has arrears and penalties because of not paying its debts on time.
The country has piled up external debt arrears and penalties of US$6.6 billion. This includes penalties of US$2.01 billion by December 2021. Of the total external debt arrears, US$4.2 billion (63%) is due to the bilateral creditors, while US$2.4 billion (37%) is due to the multilateral creditors such as the World Bank and others.
Who do we owe exactly?
Zimbabwe owes US$5.6 billion to bilateral creditors – such as individual countries – and US$2.7 billion to multilateral creditors.
Of the total bilateral external debt, US$3.9 billion is owed to the Paris Club bilateral creditors – a group of countries – and US$1.8 billion is owed to the non-Paris Club bilateral creditors. For debts owed to financial institutions, US$1.5 billion is owed to the World Bank, US$711 million to the African Development Bank and US$358 million to the European Investment Bank.
The government’s decisions over the years to take over the central bank’s debt have added to the debt pile. The country owes US$111 million to creditors under the 2015 RBZ Debt Assumption Act, while US$4.9 billion is external debt on RBZ’s balance sheet.
What’s the latest on Chinese loans?
According to a recent report by Finance Minister Mthuli Ncube to Parliament, Zimbabwe has borrowed US$2.7 billion from China since 1980. The outstanding debt to China as at August 2022 amounted to US$1.768 billion, he said.
Most of the Chinese loans have been borrowed for infrastructure projects.
On current loans, Zimbabwe borrowed US$998 million from the China Export-Import Bank for the Hwange 7 & 8 power units. Last year, the bank released US$24 million for the project. But the report by the mid-term Debt Management Office shows that, again, Zimbabwe is struggling to service some of the running Chinese loans.
According to the report, China is not releasing as much of the loans as needed because Zimbabwe is in arrears on loans for the Victoria Falls Airport (US$65.36 million), NetOne Network Expansion Phase I & II (US$66.65 million) and TelOne National Broadband Expansion Project (US$8.0 million).
Says Treasury: “Government is currently working with the Entities in default to ringfence resources for the clearance of these outstanding arrears.”
How much did we get from loans last year?
In total, in 2021, Zimbabwe received US$35.9 million from the running loan agreements.
Apart from the Hwange power station loans, Zimbabwe also got US$3.9 million from the US$28.6 million loan from the India Exim Bank for the Deka Pumping Station. This is a project to bring water from the Zambezi to the new Hwange power units.
Zimbabwe also got US$8 million from the Opec Fund for International Development (OFID). The money is being used for social projects as well as to rehabilitate irrigation schemes around the country.
From 2022 to 2025, Zimbabwe expects to receive loan disbursements of US$556.4 million. This includes US$293 million for the Hwange 7 and 8 power plants, US$20 million for the Deka Pumping Station, US$71 million for the R.G. Mugabe International Airport, NetOne Network Expansion Phase III (US$43 million) and the Bulawayo Thermal Power Station (US$82 million).