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Zimbabwe eyes mineral-backed debt deals
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Zimbabwe is exploring the use of its vast mineral resources, including platinum, gold, and lithium, to help settle part of its US$13.2 billion external debt, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube has revealed.
"When it comes to strategies for paying off Zimbabwe's external debt, we are certainly considering natural resources. There are certain structures that we will put in place," Professor Ncube said, confirming that the government has already begun servicing arrears through a platinum-backed arrangement.
"We already have one structure involving platinum in place, which we have been utilising to service some of the external debt," he added, noting plans to expand such mechanisms to fully leverage natural resources in tackling debt obligations.
Zimbabwe's debt crisis has emerged as a major barrier to growth, investment, and social development. As of December 2024, total public and publicly guaranteed debt stood at US$21.5 billion, equivalent to 47.1% of GDP, with US$13.2 billion owed externally and US$8.3 billion domestically. More than 70% of external arrears stem from interest, leaving the country unable to access fresh concessional financing for over two decades.
Zimbabwe owes US$1.48 billion to the World Bank, US$671 million to the African Development Bank (AfDB), US$372 million to the European Investment Bank, US$3.55 billion to Paris Club creditors, and US$2.22 billion to non-Paris Club lenders.
Past efforts to clear arrears, including the 2015 Lima Strategy and payments to the IMF in 2016, failed to restore access to concessional loans from the World Bank and AfDB. More recently, the AfDB proposed a US$2.6 billion bridge financing facility, but progress stalled amid concerns over governance and policy credibility.
Professor Ncube said resource-backed debt strategies will be structured around specific projects and project finance arrangements. "That's the best way. We will be able to say more as we go forward," he said.
Analysts caution that mortgaging mineral wealth could offer only temporary relief while leaving Zimbabwe exposed to commodity price fluctuations. Johnson Moyana, a Harare-based economist, said: "Zimbabwe has often turned to short-term fixes instead of lasting reforms. Using mineral resources to service debt could provide temporary relief, but unless structural weaknesses and governance issues are addressed, it will not deliver sustainable resolution."
Debt campaigners also warn that high debt servicing requirements inhibit investment in social expenditure, perpetuating low productivity and poverty, according to the African Forum and Network on Debt and Development (AFRODAD).
Zimbabwe's domestic debt has surged to 37% of GDP, significantly above the regional average of below 20%, driven by persistent budget deficits, quasi-fiscal activities by the central bank, and currency depreciation. The growing debt burden has squeezed fiscal space, diverting scarce resources from infrastructure, social services, and productive investment.
Experts say the success of the mineral-backed plan hinges on sustainable resource management, good governance, and policy consistency. Zimbabwe possesses one of Africa's richest resource bases, including the world's second-largest platinum reserves and vast lithium deposits crucial for the global green energy transition.
As Zimbabwe seeks to navigate its debt crisis, analysts say Ncube's approach could either mark a turning point or add another chapter to a long history of unsuccessful debt strategies.
"When it comes to strategies for paying off Zimbabwe's external debt, we are certainly considering natural resources. There are certain structures that we will put in place," Professor Ncube said, confirming that the government has already begun servicing arrears through a platinum-backed arrangement.
"We already have one structure involving platinum in place, which we have been utilising to service some of the external debt," he added, noting plans to expand such mechanisms to fully leverage natural resources in tackling debt obligations.
Zimbabwe's debt crisis has emerged as a major barrier to growth, investment, and social development. As of December 2024, total public and publicly guaranteed debt stood at US$21.5 billion, equivalent to 47.1% of GDP, with US$13.2 billion owed externally and US$8.3 billion domestically. More than 70% of external arrears stem from interest, leaving the country unable to access fresh concessional financing for over two decades.
Zimbabwe owes US$1.48 billion to the World Bank, US$671 million to the African Development Bank (AfDB), US$372 million to the European Investment Bank, US$3.55 billion to Paris Club creditors, and US$2.22 billion to non-Paris Club lenders.
Past efforts to clear arrears, including the 2015 Lima Strategy and payments to the IMF in 2016, failed to restore access to concessional loans from the World Bank and AfDB. More recently, the AfDB proposed a US$2.6 billion bridge financing facility, but progress stalled amid concerns over governance and policy credibility.
Analysts caution that mortgaging mineral wealth could offer only temporary relief while leaving Zimbabwe exposed to commodity price fluctuations. Johnson Moyana, a Harare-based economist, said: "Zimbabwe has often turned to short-term fixes instead of lasting reforms. Using mineral resources to service debt could provide temporary relief, but unless structural weaknesses and governance issues are addressed, it will not deliver sustainable resolution."
Debt campaigners also warn that high debt servicing requirements inhibit investment in social expenditure, perpetuating low productivity and poverty, according to the African Forum and Network on Debt and Development (AFRODAD).
Zimbabwe's domestic debt has surged to 37% of GDP, significantly above the regional average of below 20%, driven by persistent budget deficits, quasi-fiscal activities by the central bank, and currency depreciation. The growing debt burden has squeezed fiscal space, diverting scarce resources from infrastructure, social services, and productive investment.
Experts say the success of the mineral-backed plan hinges on sustainable resource management, good governance, and policy consistency. Zimbabwe possesses one of Africa's richest resource bases, including the world's second-largest platinum reserves and vast lithium deposits crucial for the global green energy transition.
As Zimbabwe seeks to navigate its debt crisis, analysts say Ncube's approach could either mark a turning point or add another chapter to a long history of unsuccessful debt strategies.
Source - Business Times
