Zimbabwe's debt unsustainably high

The International Monetary Fund (IMF) has warned that Zimbabwe's debt and external arrears remain unsustainably high, forcing the country to rely on its own resources to fund economic activities.

This development follows Zimbabwe's prolonged struggle to access international funding due to its ballooning debt, which has accumulated to an estimated US$21 billion. The IMF made the determination after concluding a Staff-Monitored Program (SMP) discussion mission to Zimbabwe. The program, requested by Zimbabwean authorities in 2023, was aimed at advancing discussions on economic reforms and fiscal policies.

In its assessment, the IMF stated that Zimbabwe's current debt situation, combined with outstanding external arrears, disqualifies it from receiving financial assistance at this stage.

"The IMF is currently precluded from providing financial support to Zimbabwe due to its unsustainable debt situation - based on the IMF's Debt Sustainability Analysis (DSA) - and official external arrears," reads an IMF statement released on February 13, 2025.

The mission, led by Wojciech Maliszewski, Deputy Unit Chief in the IMF's African Department, took place from January 30 to February 13, 2025. During the engagement, Maliszewski acknowledged that while Zimbabwe's economic activity had started recovering after an El Niño-induced drought, growth had slowed from 5.3% to an estimated 2% in 2024. The drought significantly affected agricultural output, leading to a 15% decline in production.

Despite these challenges, Maliszewski highlighted that strong remittances continued to support sectors such as domestic trade, services, and construction. This, in turn, improved Zimbabwe's current account surplus to an estimated US$500 million (1.4% of GDP) in 2024.

The IMF mission found that fiscal pressures intensified in 2024, largely due to the transfer of the Reserve Bank of Zimbabwe's quasi-fiscal operations to the Treasury. While revenue collection remained strong, the 2024 budget deficit was estimated at 1% of GDP, prompting the government to accumulate domestic expenditure arrears and implement emergency spending cuts.

"Key areas of discussion during the mission included fiscal consolidation, avoiding monetary financing and new arrears, and building foundations for a durable fiscal consolidation," the IMF statement noted. Other discussions focused on addressing fiscal risks related to the Mutapa Investment Fund and enhancing monetary policy frameworks for the Zimbabwean dollar (ZiG).

Looking ahead, the IMF projected that Zimbabwe's economic growth in 2025 could rise to 6%, driven by a recovery in agricultural output due to improved climate conditions and favorable terms of trade.

Despite the country's ineligibility for financial assistance, the IMF affirmed its commitment to providing policy advice and technical assistance to Zimbabwe.

"The SMP aims to support Zimbabwe's efforts to stabilize the economy and re-engage with the international community on arrears clearance and debt resolution. The program's main objective is to durably anchor macroeconomic stability, building on policy recommendations from the 2024 Article IV consultation," the IMF concluded.