THE Government will restructure the terms and conditions of some of its debt, as well as issue long-term securities to reduce the cost of debt servicing, Finance, Economic Development and Investment Promotion Minister Prof Mthuli Ncube has said.
"Servicing of the debt, in the absence of long-term concessional external support and preference for short-term paper by domestic investors, has increased debt servicing costs and created an unfavourable fiscal position that undermines support for the social sectors and other developmental
Programmes," said Minister Ncube in the 2025 Budget Strategy Paper.
Zimbabwe's debt surged by 54,7 percent in nominal terms during 2023, reaching 96,7 percent of gross domestic product (GDP) of US$21,2 billion from 62,1 percent of GDP (US$13,7 billion) in 2021.
The increase was primarily driven by domestic debt.
Minister Ncube said the rapid growth was mainly on account of the Government takeover of legacy debts, the Reserve Bank of Zimbabwe's external liabilities, capitalisation of the Mutapa Investment Fund and the compensation of former farm owners.
Domestic debt climbed from US$5,2 billion in 2022 to US$8,1 billion in 2023, fuelled by US$2,84 billion in Treasury bond issuance, including US$924 million to clear legacy RBZ debts and US$1,92 billion to capitalise the Mutapa Investment Fund.
In its Country Focus Report released last week, the African Development Bank (AfDB) warned Zimbabwe's unsustainable debt burden posed a significant obstacle to the successful implementation of the country's National Development Strategy 1 (NDS1)
To curb inflation risks, AfDB said Zimbabwe must reduce its reliance on domestic borrowing, the AfDB warned.
This can be achieved by eliminating the Reserve Bank's quasi-fiscal operations and restricting its spending to allocated budget funds.
Prof Ncube said the Government would accelerate the Zimbabwe Arrears Clearance and Debt Resolution Strategy through the Structured Dialogue Platform and the Engagement and Re-Engagement agenda to address the debt burden and ensure access to external long-term concessional funding.
The AfDB report estimates show that there is a financing gap of US$3,76 billion annually by 2030 about accelerating Zimbabwe's economic development and being on a par with more successful developing countries from other regions.
In other words, Zimbabwe's annual financing gap is estimated at 13,4 and 2,4 percent of GDP to achieve economic development by 2030 and 2063 respectively.
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The report notes better access to finance is one of the key factors of economic development for Zimbabwe.
As such, Zimbabwe must urgently raise significant resources to fast-track the process of economic development and sustain the pace of development.
The report employs a method based on the Sustainable Development Goals (SDGs) to calculate the estimated financing needs and resulting gap for Zimbabwe's economic development.
The interlinkages between different SDGs mean that they all contribute directly or indirectly to economic development.
Some goals are, however, more critical for the accomplishment of economic development and require more significant financial investments than others.
The financing needs and gaps in the critical sectors reflect Zimbabwe's shortcomings in key SDGs directly linked to economic development, said the AfBD.
