Zimbabwe adopts multi-pronged strategy to manage debt
Zimbabwe is pursuing a multi-faceted approach to address its US$21 billion debt obligations, with the government considering leveraging the country's abundant natural resources as part of the solution, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube has revealed.
The debt burden, which includes approximately US$12.3 billion in external arrears, has been a significant constraint on Zimbabwe's economic growth and development. To tackle this challenge, the Second Republic has established a High-level Arrears Clearance and Debt Resolution Platform aimed at resolving the issue systematically.
In response to queries, Prof Ncube explained that Zimbabwe is exploring a combination of bridge financing and natural resource-backed deals to facilitate successful arrears clearance. He described the chosen path as one that prioritises clearing arrears owed to major multilateral lenders such as the World Bank and the African Development Bank (AfDB) first.
"The process requires Zimbabwe to enter into a Staff Monitored Programme (SMP) with these institutions, after which a sponsor would provide bridge financing to clear the arrears," Prof Ncube said. He elaborated that the actual clearance is a swift "three-hour" transaction once all conditions are met, but reaching that point involves years of preparation and negotiations.
Alongside this technical process, the government is also evaluating alternative strategies that include using the country's own resources, including natural assets, to service some debts. "We consider those possibilities as well," he added.
Highlighting progress made, Prof Ncube noted that Zimbabwe's debt-to-GDP ratio has improved, moving out of the "red zone" of unsustainable debt levels. As of 2024, the ratio stood at 46 percent and is expected to decline to 45 percent by the end of the year, signalling better debt sustainability prospects.
On the Staff Monitored Programme with the International Monetary Fund (IMF), the Minister disclosed that discussions are ongoing and have identified economic reforms that Zimbabwe plans to implement within the next six months. These reforms are critical for advancing to the next phase, which involves negotiations on Zimbabwe's Paris Club debt, including requests for penalty waivers and extended debt maturities.
"We have made considerable progress but have not yet finalised agreement on the SMP," Prof Ncube stated. "We continue to engage with the IMF on fine-tuning reforms to meet the programme's requirements."
Addressing trade relations, Prof Ncube spoke about ongoing negotiations with the United States over tariffs. Zimbabwe currently faces an 18 percent tariff on its exports to the US, prompting President Emmerson Mnangagwa to remove tariffs on American imports as a goodwill gesture.
"Our proposal is to maintain a no-tariff arrangement during the negotiation period to show goodwill," said the Finance Minister. He expressed optimism that the talks would lead to a reciprocal tariff agreement beneficial to both countries.
The negotiations also offer an opportunity to strengthen broader trade ties between Zimbabwe and the US. Prof Ncube emphasized Zimbabwe's intent to expand access to US markets for a wider range of products, while also encouraging reciprocal arrangements.
"We are presenting proposals to US authorities that we believe will create win-win outcomes," he said. "This will enable us to explore new markets for our products, including the US, while enhancing bilateral trade relations."
Zimbabwe continues to navigate complex debt and trade challenges with a strategic focus on leveraging its economic potential, particularly its rich natural resources, as it seeks sustainable growth and financial stability.
