Zimbabwe charts ambitious return to global finance at debt conference

Zimbabwe's president will host a conference of creditors and finance executives on Monday to discuss ambitious goals to clear debt arrears and restructure $12.7bn (R229bn) in external debt, aiming to eventually tap international capital markets for the first time in more than two decades.

Zimbabwe's debt pile accounts for 81% of GDP, and clearing it will be a tough challenge for a country that has faced many financial crises in recent decades from repeated bouts of hyperinflation to multiple unsuccessful attempts to launch new currency regimes.

“The issue of arrears is a major albatross around our neck,” said Prosper Chitambara, a Harare-based independent economist.

It will be a long road. Even money from the International Monetary Fund (IMF), the world's lender of last resort, is presently unavailable for Zimbabwe, but experts said paying off arrears is essential.

“Once the arrears are cleared it will be cheaper to borrow and easier to attract investment,” Chitambara said.

Zimbabwe's President Emmerson Mnangagwa and African Development Bank (AfDB) president Akinwumi Adesina will attend the one-day meeting in Harare, along with creditors, development groups and private sector representatives.

Getting on track with bilateral creditors — and clearing arrears with the AfDB, the World Bank and the European Investment Bank — is necessary to unlock funding for Zimbabwe, once a regional breadbasket that struggles to feed its own people.

“The IMF is precluded from providing financial support to Zimbabwe” due to an unsustainable debt situation and external arrears, an IMF spokesperson said.

Zimbabwe is targeting as a first step an IMF staff-monitored programme (SMP) which does not include financial assistance or require approval by the fund's executive board.

An SMP, government officials said, would help Zimbabwe demonstrate a return to sound economic policies. However, the government missed its initial goal to have an SMP in place by April, as well as a second deadline last month.

This has limited IMF engagement to technical assistance, such as budget preparation.

The UN estimates 24 of Africa's 35 low-income countries are at high risk of debt distress. Since 2020, Zambia and Chad have finalised debt reworks. Ghana is wrapping up its debt rework and Ethiopia is in the midst of a restructuring.

However, Zimbabwe is no ordinary default. While 45% of its burden is outstanding debt, the rest is arrears and penalties, according to a 2023 government presentation.

Finance minister Mthuli Ncube said The Africa Legal Support, an AfDB facility, is paying for the Global Sovereign Advisory Company and law firm Kepler-Karst to help advise the government.

Ncube said Zimbabwe has been paying token amounts to debtors, including 16 bilateral creditors, but gave no further details.

The government aims to outline a “road map and way forward” by the end of the event.

Reuters