Zimbabwe owes US$1.7bn to pensioners, schools, contractors

Zimbabwe's government ministries continue to operate outside the official Public Finance Management System (PFMS), committing to contracts beyond approved budgets and under weak monitoring structures. This fiscal mismanagement has allowed expenditure to spiral out of control, resulting in the accumulation of unpaid bills that now total ZIG45.6 billion (US$1.7 billion), affecting pensioners, service providers, schools, health programmes, and contractors.

In response, the government has tabled a five-year Expenditure Arrears Clearance Strategy (2026–2030), presented to Parliament by Finance Minister Professor Mthuli Ncube on November 27, 2025. The strategy seeks to liquidate the debt and prevent further fiscal slippage, addressing the consequences of "over-contracting" and weak expenditure controls. At the end of 2024, 98 percent of the arrears, amounting to US$1.69 billion, were denominated in US dollars.

Significant portions of the arrears are owed to social and employee welfare programmes, including US$98 million to the Basic Education Assistance Module (BEAM), US$77.05 million in Results-Based Financing claims for health services, US$69.58 million to the Pension Fund, US$23.48 million to the National Social Security Authority (NSSA), US$28.50 million for Medical Aid (PSMAS), US$0.39 million to the Government Employee Mutual Savings Fund, and US$50 million to the Zimbabwe School Examinations Council (ZIMSEC).

The strategy attributes the arrears to ministries transacting outside PFMS, weak monitoring, over-contracting, and misalignment between budgets and actual cash releases. It warns that the accumulation of arrears poses a major Public Financial Management (PFM) risk, undermining effective budget implementation and fiscal discipline.

To clear the debt, the government plans to use a reverse auction mechanism, converting verified arrears into five-year, non-tradable government securities. Creditors will bid to sell their debt back to the state at a discount, with the largest cuts being paid first. Debt-for-asset swaps with entities such as pension funds are also being considered.

The strategy prioritises social obligations, with Category 1, totalling US$305 million, covering pensions, health insurance, and support for students and war veterans. Category 2, amounting to US$58.84 million, includes utilities and ZIMSEC, while Category 3, US$1.32 billion in capital projects for dams, roads, and agricultural inputs, will be addressed last due to limited immediate social impact.

Measures to prevent new arrears include mandatory PFMS use, Treasury approval for contracts over US$2 million, and alignment of budget releases with cash availability. The strategy asserts that the government is committed to clearing arrears and strengthening fiscal controls, though its success depends on sustained fiscal improvements and creditors' willingness to accept discounted payments.

Former Education Minister and Bulawayo Mayor, Senator David Coltart, expressed alarm at the arrears affecting education. He noted that unpaid BEAM funds and ZIMSEC allocations could deny children access to school, disrupt learning materials, and lower examination standards, potentially producing a generation less employable and productive. "Government needs to give an unequivocal undertaking that this policy will end immediately so that children are not so badly prejudiced going forward. The future of Zimbabwe depends on it," Coltart warned.