Zimbabwe missing out on mega EU loans - loans have to be paid back

Zimbabwe is missing out on crucial loans from Europe's largest financial institutions, including the European Investment Bank (EIB), due to its unsustainable debt burden, the European Union's ambassador to Zimbabwe, Jobst von Kirchmann, has revealed.

As of September 2024, Zimbabwe's total debt stands at a staggering US$21.1 billion, owed to a mix of domestic and international lenders such as the World Bank, African Development Bank (AfDB), and the Paris Club. This massive debt load has pushed Zimbabwe's risk profile to high levels, deterring fresh credit inflows and foreign investment.

Through EU-backed lending programs funded by the EIB, Zimbabwean banks including CABS, First Capital Bank, Stanbic Bank, and NMB Bank have accessed over US$100 million in credit. However, von Kirchmann described this amount as merely "a drop in the ocean" compared to the financing the country could unlock if its debt challenges were resolved.

"The EIB extends loans to local banks, which then on-lend to the private sector," von Kirchmann explained. "Zimbabwe's private sector has been professional and diligent in repaying these loans. The obstacle lies in unlocking concessional funding for the government, which requires meaningful progress on clearing arrears."

Zimbabwe initiated a debt clearance process in 2022 under the leadership of the AfDB following the easing of EU sanctions. Yet, global creditors continue to demand substantive political and economic reforms before agreeing to clear arrears and restore Zimbabwe's financial credibility. A major sticking point has been the recently enacted Private Voluntary Organisations Amendment Bill, which international donors view as undermining constitutional rights and curbing civil society activities.

As a result, the EU suspended financial support for Zimbabwe's governance reform programs earlier in 2025. Creditors are also calling for Zimbabwe to commit to political and electoral reforms and demonstrate tangible progress toward free and fair elections.

Von Kirchmann disclosed that Zimbabwe currently has about US$21.7 billion in arrears, which severely limits many banks' ability to operate efficiently and provide capital to the economy. Despite this, the EU continues to support Zimbabwe's private sector while actively engaging in efforts to clear arrears.

"The heavy debt burden stifles Zimbabwe's growth potential and deters international lending," von Kirchmann said. "The president's High-Level Platform for Debt Resolution and Arrears Clearance is a positive step in the right direction."

Although the EU is investing a massive €150 billion (approximately US$169.59 billion) in Africa through its Global Gateway initiative aimed at infrastructure development and sustainability, Zimbabwe remains unable to fully benefit due to its arrears situation.

"The door will open soon," the ambassador said optimistically.

Meanwhile, the International Monetary Fund (IMF) has also classified Zimbabwe's debt as unsustainable, rendering the country ineligible for financial assistance until significant progress is made.