Zim worried over debt refinancing risks

With 90 percent of Zimbabwe’s securities maturing in under two years, the Government is considering debt refinancing through the issuance of long-term bonds, according to a recent bulletin released by Treasury on the country’s debt profile.

This year, the outstanding securities, constituting bonds and Treasury bills, stood at nearly $140 billion and about $36 billion for next year, according to Treasury Department.

Debt refinancing, or replacement of the existing debt with new debt, is common for Governments even businesses and individuals. The old debt may be coming due, and the borrower may want to convert it into debt with a longer maturity period.

“The maturity profile of outstanding domestic debt securities indicates a high refinancing risk, with over 90 percent of securities maturing in under two years,” said the Treasury. “To mitigate this risk, the Treasury is opting for longer maturities through the issuance of long-term bonds to finance infrastructure projects.”

There is also a wall on bond maturities of Treasury bonds for blocked funds, which reflects a refinancing risk in 2025, with the first batch maturing, amounting to US$412 million. In this regard, Treasury has established a Debt Redemption Fund to ensure enough resources are set aside for timely debt servicing, including maturing Treasury debt instruments, according to the Treasury bulletin.

Zimbabwe’s public debt could have surged seven-fold during the first half of the year due to the sharp depreciation of the domestic currency, an analysis by this public show.

The public debt, with 71 percent of it being foreign-denominated, surged to just above $12 trillion in 2022 after the local dollar lost 544 percent of its value against the US dollar.

Since December 2022, the domestic currency has depreciated to about $4 500 against the greenback.

-ebusinssweekly