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Zimbabwe targets 2030 to clear US$21 billion debt
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Zimbabwe has set an ambitious 2030 deadline to clear its ballooning US$21 billion public debt, in a bid to create the foundations for a stable mono-currency regime anchored by the Zimbabwe Gold (ZiG) currency, Finance Minister Mthuli Ncube has said.
Speaking at the just-ended Zimbabwe Association of Pension Funds annual congress, Ncube said clearing the country's arrears would enable a full transition from the current multi-currency system to a local currency-driven economy supported by access to international financial support.
"Frankly, as government, we couldn't say that the multi-currency regime is permanent. We wouldn't be telling the truth," Ncube told delegates. "There should be some time when a domestic currency ought to take root, especially after having cleared our arrears."
As of September 2024, Zimbabwe owes US$21.1 billion to domestic and foreign creditors, including the World Bank, the African Development Bank (AfDB), and the Paris Club. This debt burden has locked the country out of traditional lines of credit and reduced investor confidence, compounding economic vulnerabilities.
Ncube explained that the 2030 timeline was chosen to give Zimbabwe sufficient time to clear arrears and restore access to balance-of-payments support - a prerequisite for long-term currency stability.
"There is no reason why Zimbabwe should continue to have a multi-currency regime when we have cleared our debt arrears," he said. "We have every reason to embrace a mono-currency and support it."
Despite government optimism, economists have cast serious doubts over the feasibility of the debt clearance target.
"It is not possible for the country to achieve the target unless some of the debt is written off or the country ends up mortgaging its minerals against the debt," said economist Trust Chikohora.
Stevenson Dhlamini, a research fellow at the Public Policy and Research Institute of Zimbabwe, warned that the repayment plan could severely strain Zimbabwe's limited foreign currency reserves. He presented a debt amortisation model showing that servicing the principal alone over seven years would require US$3 billion annually.
With an assumed blended interest rate of 5%, the total repayment in the first year would balloon to US$4.05 billion - roughly 11.6% of Zimbabwe's GDP.
"Given Zimbabwe's current export earnings of around US$7.2 billion annually, this repayment schedule would consume nearly all foreign currency earnings, leaving little for essential imports such as fuel, machinery, and raw materials," Dhlamini said.
He warned that such an aggressive debt repayment programme could result in economic contraction rather than growth, unless accompanied by debt restructuring, partial forgiveness, or a significant boost in exports and foreign investment.
Zimbabwe's journey toward debt clearance officially began in 2022, when the government launched a re-engagement programme led by the AfDB, following a gradual easing of European Union sanctions imposed in 2002.
However, progress remains slow. International creditors and partners continue to insist on sweeping political and economic reforms, particularly around governance, electoral integrity, and civil liberties.
A major sticking point in negotiations is the recently enacted Private Voluntary Organisations Amendment Bill, which critics say infringes on constitutional rights and stifles civil society. Observers argue that such legislation undermines trust and could jeopardise the re-engagement process unless reversed or reformed.
In addition to legislative changes, Zimbabwe is under pressure to demonstrate commitment to political and electoral reforms, including the conduct of free and fair elections.
Ncube, however, remains hopeful.
"Trust us to deliver arrears clearance by 2030 and we will all live happily ever after," he said.
As the clock ticks towards 2030, Zimbabwe's success in achieving debt clearance - and subsequently transitioning to a stable mono-currency regime - will hinge on both domestic policy discipline and international goodwill.
Speaking at the just-ended Zimbabwe Association of Pension Funds annual congress, Ncube said clearing the country's arrears would enable a full transition from the current multi-currency system to a local currency-driven economy supported by access to international financial support.
"Frankly, as government, we couldn't say that the multi-currency regime is permanent. We wouldn't be telling the truth," Ncube told delegates. "There should be some time when a domestic currency ought to take root, especially after having cleared our arrears."
As of September 2024, Zimbabwe owes US$21.1 billion to domestic and foreign creditors, including the World Bank, the African Development Bank (AfDB), and the Paris Club. This debt burden has locked the country out of traditional lines of credit and reduced investor confidence, compounding economic vulnerabilities.
Ncube explained that the 2030 timeline was chosen to give Zimbabwe sufficient time to clear arrears and restore access to balance-of-payments support - a prerequisite for long-term currency stability.
"There is no reason why Zimbabwe should continue to have a multi-currency regime when we have cleared our debt arrears," he said. "We have every reason to embrace a mono-currency and support it."
Despite government optimism, economists have cast serious doubts over the feasibility of the debt clearance target.
"It is not possible for the country to achieve the target unless some of the debt is written off or the country ends up mortgaging its minerals against the debt," said economist Trust Chikohora.
Stevenson Dhlamini, a research fellow at the Public Policy and Research Institute of Zimbabwe, warned that the repayment plan could severely strain Zimbabwe's limited foreign currency reserves. He presented a debt amortisation model showing that servicing the principal alone over seven years would require US$3 billion annually.
With an assumed blended interest rate of 5%, the total repayment in the first year would balloon to US$4.05 billion - roughly 11.6% of Zimbabwe's GDP.
"Given Zimbabwe's current export earnings of around US$7.2 billion annually, this repayment schedule would consume nearly all foreign currency earnings, leaving little for essential imports such as fuel, machinery, and raw materials," Dhlamini said.
He warned that such an aggressive debt repayment programme could result in economic contraction rather than growth, unless accompanied by debt restructuring, partial forgiveness, or a significant boost in exports and foreign investment.
Zimbabwe's journey toward debt clearance officially began in 2022, when the government launched a re-engagement programme led by the AfDB, following a gradual easing of European Union sanctions imposed in 2002.
However, progress remains slow. International creditors and partners continue to insist on sweeping political and economic reforms, particularly around governance, electoral integrity, and civil liberties.
A major sticking point in negotiations is the recently enacted Private Voluntary Organisations Amendment Bill, which critics say infringes on constitutional rights and stifles civil society. Observers argue that such legislation undermines trust and could jeopardise the re-engagement process unless reversed or reformed.
In addition to legislative changes, Zimbabwe is under pressure to demonstrate commitment to political and electoral reforms, including the conduct of free and fair elections.
Ncube, however, remains hopeful.
"Trust us to deliver arrears clearance by 2030 and we will all live happily ever after," he said.
As the clock ticks towards 2030, Zimbabwe's success in achieving debt clearance - and subsequently transitioning to a stable mono-currency regime - will hinge on both domestic policy discipline and international goodwill.
Source - newsday
