Zimbabwe among Africa's most debt-distressed economies

Zimbabwe has fallen deeper into Africa's most dangerous debt category after being listed among the continent's worst debt-distressed economies in a joint report prepared by the United Nations Development Programme, African Union, United Nations Economic Commission for Africa and the African Development Bank.

The report, titled The Impacts of the Middle East Conflict on African Economies, grouped Zimbabwe alongside countries such as Sudan, Ethiopia, Malawi, Djibouti, Republic of the Congo and Sao Tome and Principe - economies battling severe fiscal instability, debt restructuring pressures, foreign currency shortages or conflict-related collapse.

Zimbabwe's public and publicly guaranteed debt is estimated at about US$23 billion, nearly half of the country's estimated US$50 billion gross domestic product (GDP).

However, economists warn the actual burden may be significantly higher once contingent liabilities, state guarantees, arrears and quasi-fiscal obligations are included.

The classification highlights worsening sovereign risk concerns at a time when Harare is trying to rebuild relations with international creditors and secure debt relief after years of isolation from concessional financing markets.

Zimbabwe remains locked out of key international capital markets due to unresolved arrears owed to institutions including the AfDB and World Bank.

Analysts say a major concern is the growing shift toward private-sector linked debt and heavily leveraged infrastructure financing backed by government guarantees.

According to the Zimbabwe Investment and Development Agency, foreign currency-denominated debt financing reached a record US$431,37 million in the first quarter of 2026 - nearly double the previous peak recorded in late 2025.

ZIDA said the increase reflected rising dependence on debt-funded investment as companies struggle to access long-term equity financing.

"Debt financing reached its highest level in Q1 2026 at US$431,37 million, nearly double the peak recorded in Q4 2025," the agency noted in its report.

Economist Gift Mugano said the increase in lending reflected stronger liquidity and support for productive sectors of the economy.

"When you talk about a doubling of lending, you have to remember that this is debt financing - companies borrowing from banks. It is not equity financing; it is still credit-driven," Mugano said.

He argued that most lending was directed toward production-oriented sectors, suggesting increased economic activity.

But other analysts warned that Zimbabwe's growing debt exposure mirrors a broader African trend where governments and companies are borrowing heavily simply to sustain operations amid weak domestic savings, low exports and shrinking fiscal space.

The Zimbabwe National Chamber of Commerce recently warned that sovereign guarantees attached to private infrastructure projects could expose taxpayers to major financial risks if projects fail.

"The central issue arising from General Notice 338 of 2026 is risk allocation," ZNCC said in a recent submission to government.

"Where a private project is highly leveraged and dependent on a government guarantee, the downside risk is effectively transferred to the state."

Independent economist Vince Musewe questioned the credibility of state guarantees given Zimbabwe's history of debt defaults and delayed payments.

"How can a government that fails to pay contractors on its current projects guarantee payment in future projects?" Musewe said.

The latest warnings come as African economies face mounting pressure from post-pandemic borrowing, climate-related shocks, inflation, high global interest rates and weakening commodity prices.

Sudan currently remains Africa's most indebted economy, with debt estimated at more than 250% of GDP amid ongoing conflict and economic collapse.