Debt resolution key in determining Zimbabwe’s economic future

As Zimbabwe seeks to resolve her debt overhang, analysts have underscored the pivotal role such an exercise will play in helping determine the future of the country in terms of economic growth and infrastructure development.

Dr Prosper Chitambara, an economist, underscored the urgency of Zimbabwe’s debt resolution.

He noted; “Zimbabwe’s debt situation is a significant impediment to its economic progress. Clearing this debt is not just a financial imperative, but a strategic move to create a conducive environment for sustained infrastructure development.”

Ms Gladys Shumbambiri – Mutsopotsi, another economic analyst, echoed same sentiments.

“Investors closely monitor a country’s fiscal responsibility before committing to long-term infrastructure projects. Resolving the debt issue sends a positive signal, potentially unlocking avenues for much-needed funding in critical sectors,” she said.

According to Treasury, total external debt, as at end September 2023 is estimated at US$14,04 billion, including US$5,7 billion of bilateral debt which is 41 percent of the amount, US$2,6 billion of multilateral debt which is 18,4 percent of the amount.

RBZ debt which represents 24 percent of external debt is US$3,4 billion, and US$2,3 billion is of blocked funds constituting 16,6 percent. Of the total bilateral external debt of US$5,7 billion, Paris Club debt amounts to US$3,6 billion, while US$2,2 billion is owed to Non-Paris Club creditors.

Of the total external debt of US$8,3 billion excluding RBZ debt and blocked funds, principal and interest arrears and penalties represent 76 percent or US$6,3 billion.

The bulk of the external debt stock is made up of principal arrears of US$2,7 billion, interest arrears of US$1,6 billion and penalties of US$2,1 billion, while the debt outstanding and disbursed accounts for US$2,03 billion.

Zimbabwe has been making token payments to all its foreign financiers it owes among them the Paris Club, which has 17 members, the World bank and the African Development Bank (AfDB).

Namatai Maeresera, an economic analyst, points out that the resolution of Zimbabwe’s debt could lead to improved credit ratings.

“A positive credit rating is a gateway to accessing funds at favourable terms. This, in turn, can pave the way for increased infrastructure lending, which is pivotal for economic growth and development,” Maeresera added.

Yvonne Chifamba, a developmental practitioner, emphasises the broader impact of debt resolution on the country’s social and economic well-being.

“Infrastructure development is not just about economic growth, but it is also about enhancing the overall quality of life for citizens. Improved roads, energy and healthcare facilities contribute to a healthier and more prosperous society.”

The economic landscape of Zimbabwe has faced challenges in recent years, with debt levels reaching unsustainable levels. The resolution of this debt crisis is seen as a linchpin for attracting foreign investment and fostering domestic economic stability.

Zimbabwe’s government has taken notable steps to address its debt concerns, engaging with international financial institutions and creditors. Analysts view these efforts positively but stress the need for a comprehensive and sustainable debt resolution strategy.

Dr. Prosper Chitambara emphasised the importance of a multi-faceted approach.

“Zimbabwe needs a well-structured debt management plan that not only addresses the immediate concerns but also lays the foundation for responsible fiscal policies in the future. This will instill confidence among investors and development partners,” he said.

Gladys Shumbambiri – Mutsopotsi highlights the potential benefits beyond debt relief. “Zimbabwe has immense potential for economic growth, and resolving the debt issue can unlock that potential. Investors are watching closely, and a successful resolution could lead to a renewed interest in Zimbabwe as a viable investment destination.”

Namatai Maeresera adds a cautionary note, stating; “While debt resolution is crucial, it should be accompanied by prudent fiscal policies and transparent governance. These factors are essential for building trust and sustaining economic progress in the long term.”

Ms Chifamba emphasised the societal impact of resolving Zimbabwe’s debt crisis.

“Beyond the economic indicators, we must focus on how infrastructure development improves the lives of ordinary citizens. A stable and growing economy is the foundation for building a better future for all Zimbabweans.”

Collectively, the think tanks believe the resolution of Zimbabwe’s debt is not merely a financial exercise, but it is a catalyst for broader economic transformation.

Analysts agree that success in this endeavour will not only attract infrastructure lending but also lay the groundwork for a more prosperous and sustainable future for the nation and its people.-ebusinessweekly