HARARE, – Zimbabwean President Emmerson Mnangagwa convened a high-level conference with creditors and financial leaders on Monday to advance the country’s efforts to clear $12.7 billion in external debt and lay the groundwork for re-entry into international capital markets for the first time in over two decades.
Zimbabwe’s external debt, which accounts for 81% of its gross domestic product, poses a significant challenge for a nation that has endured prolonged economic instability, hyperinflation, and failed currency reforms.
Addressing the meeting, Mnangagwa confirmed ongoing negotiations with the International Monetary Fund (IMF) for a Staff Monitored Program (SMP), a crucial step towards restoring confidence in Zimbabwe’s economic policies.
African Development Bank (AfDB) President Akinwumi Adesina emphasised the importance of securing an SMP, describing it as a key pillar for implementing policy reforms.
“The AfDB stands ready to support Zimbabwe with financial assistance to cushion the economy against potential adverse effects of these reforms,” Adesina said. He also noted that funds are available from a special facility to help Zimbabwe settle its arrears, though he did not provide specific figures.
Finance Minister Mthuli Ncube projected that timelines for clearing arrears and implementing broader economic reforms would become clearer by mid-2025, contingent on bridge financing commitments from lenders.
Zimbabwe’s total external debt includes a significant portion of arrears and penalties, which have compounded over years of economic mismanagement. The country owes multilateral institutions such as the AfDB, the World Bank, and the European Investment Bank.
Clearing these arrears is seen as essential to restoring access to concessional loans and unlocking funding from international financial institutions. Independent economist Prosper Chitambara described the issue as a “major albatross” on the country’s economy.
“Once the arrears are cleared, borrowing will become cheaper, and it will be easier to attract investment,” Chitambara said.
While the IMF remains precluded from offering financial support to Zimbabwe due to unsustainable debt levels and external arrears, the government views an SMP as a key mechanism to signal its return to sound fiscal policies.
However, Zimbabwe has already missed two deadlines to implement the SMP, including its initial target of April and a subsequent goal set for October. This has limited the IMF’s engagement to providing technical assistance, such as supporting budget preparation.
Zimbabwe’s debt challenges are part of a broader pattern across Africa, where 24 out of 35 low-income nations are at high risk of debt distress, according to the United Nations. Countries such as Zambia, Chad, and Ghana have recently undertaken debt restructurings, while Ethiopia is navigating its own.
Zimbabwe’s case, however, is complicated by the fact that nearly 55% of its external debt comprises arrears and penalties. The government has been making only token payments to creditors, including 16 bilateral lenders, according to Ncube, though no detailed figures were provided.
The Africa Legal Support Facility, an AfDB initiative, is funding advisory services from the Global Sovereign Advisory Company and law firm Kepler-Karst to assist Zimbabwe in its debt restructuring efforts.
Mnangagwa reiterated that addressing Zimbabwe’s debt burden is essential to achieving sustainable economic growth. As the government moves forward with negotiations, it faces pressure to balance ambitious reform commitments with immediate economic realities.
For Zimbabwe, clearing arrears and restoring access to international financial systems could mark a turning point after decades of economic isolation and instability.
Source: Reuters