ZIMBABWE’S PATH TO TACKLE ITS DEBT CRISIS

Zimbabwe is facing a huge debt problem that is holding back the country’s economy. With a debt of over US$21 billion, the country’s debt-to-GDP ratio is dangerously high. This shows that the public debt is growing faster than the country’s income. As a result, Zimbabwe is struggling to repay its debts, which makes it even harder to grow the economy in a sustainable way.

The heavy debt burden has many negative effects. A large part of Zimbabwe’s revenue is being used to pay off debt instead of investing in important areas like infrastructure, education, and healthcare. This has caused many public services to fail, leading to more poverty and inequality. Businesses and individuals are also suffering because of high inflation and a weak currency, which makes it difficult to access foreign currency for trade or savings. Zimbabwe’s debt levels have also made it almost impossible for the country to borrow money from international lenders, which limits opportunities for economic growth.

To address this crisis, Zimbabwe has started a High-Level Structured Dialogue Platform for Arrears Clearance and Debt Resolution. This initiative is led by former Mozambican president Joachim Chissano and African Development Bank president Akinwumi Adesina. The goal is to come up with effective debt management strategies to reduce the risks and costs of Zimbabwe’s external debt. This includes plans for restructuring the debt, maintaining fiscal discipline, and implementing economic reforms.

One key area is governance reforms. Zimbabwe has committed to strengthening democratic principles like constitutionalism, the rule of law, property rights, judicial independence, and human rights. This is a major step towards building trust with creditors and international partners.

President Emmerson Mnangagwa spoke at a forum for this initiative, highlighting progress and plans. He said Zimbabwe has seen growth despite challenges. The economy grew by 5.3% in 2023 and is expected to grow by 2% in 2024 due to drought effects. By 2025, a 6% growth is projected, thanks to recovering agriculture and mining sectors. President Mnangagwa emphasized that fiscal discipline is a priority, with budget deficits being kept below 2% of GDP. A tight monetary policy is also in place to manage money supply growth and ensure currency stability.

Zimbabwe has introduced several measures to support its economic reforms. In April 2024, a new local currency, the Zimbabwe Gold (ZiG), was launched. The Reserve Bank of Zimbabwe’s foreign currency liabilities were transferred to the Treasury to streamline financial management. To improve land tenure, the government has started issuing bankable documents for land under the Land Reform Programme, making it easier for farmers to secure loans.

The government is also addressing compensation for farms affected by the Land Reform Programme. In 2024, US$35 million was allocated for compensation, with many applications already approved for payment.

To enhance governance, new bills are being introduced, such as the Whistleblower Protection Bill and the Witness Protection Bill. These are designed to fight corruption and improve transparency. The decentralization of justice delivery and the abolition of the death penalty are further steps towards strengthening human rights.

Infrastructure development remains a key focus, with ongoing projects funded mostly through domestic resources and non-concessional financing. President Mnangagwa called for more support from international financial institutions and development partners to unlock concessional financing, which is critical for Zimbabwe’s long-term development goals.

The President expressed gratitude to all stakeholders supporting this process, including the African Development Bank and international advisors. He reaffirmed the government’s commitment to achieving sustainable and inclusive economic growth through this initiative.

Zimbabwe’s efforts to tackle its debt crisis show a clear determination to rebuild the economy. While the road ahead is challenging, these steps mark progress toward resolving the country’s debt problem and laying the foundation for a brighter future.