ZIMBABWE’S total debt stock has soared to US$18 billion as of December 2022 from US$17.2 billion reported in prior comparative period as the distressed economy struggles to extricate itself from the debt albatross, a new Treasury report has shown.
With no budgetary support from traditional lenders such as international financial institutions such as the World Bank and International Monetary Fund (IMF) due to non-payment of arrears, Zimbabwe has been mainly relying on grants, bilateral loans and domestic resources to finance its key capital projects.
According to the latest Annual Debt Bulletin for the 2022 financial year in United States dollar terms, total public and publicly guaranteed (PPG) debt amounted to US$18 billion as at end December 2022, comprising US$12.8 billion of external debt, and domestic debt of US$5.2 billion.
The debt-ridden nation established a structured dialogue platform with all creditors and development partners in order to institutionalise negotiations on economic and governance reforms to underpin the arrears clearance and debt resolution process.
After several failed attempts to settle arrears with international financial institutions (IFIs) such as the World Bank and the African Development Bank (AfDB), which all enjoy preferred creditor status, Zimbabwe, which has been struggling to access long-term concessional funding, adopted a new strategy which is led by AfDB.
“Total PPG external debt as at end December 2022, amounted to US$12.83 billion, comprising of US$5.89 billion of bilateral debt (45.9 per cent of total external PPG debt), US$2.70 billion of multilateral debt (21 per cent of total external PPG debt), and US$4.24 billion of debt contracted by the RBZ (33 per cent of total external PPG debt),” the report reads.
“Bilateral and multilateral external debt amounted to US$8.59 billion, with arrears of principal and interest, including penalties amounting to US$6.68 billion (78 percent).”
The report further shows that multilateral external debt amounted to US$2.697 billion, with arrears and penalties amounting to US$2.479 billion (92%): World Bank Group US$1.546 billion (arrears of US$1.412; at 91%); African Development Bank Group US$692 million (arrears of US$664 million; at 96%); European Investment Bank US$395 million (arrears and penalties of US$384m; at 97%); and other multilateral creditors (BADEA, NDF, OPEC and IFAD) US$64 million (arrears of US$19 million; at 30%).
External debt owed to bilateral creditors amounted to US$5.89 billion, as at end December 2022.
Of this bilateral external debt, Paris Club creditors are owed US$3.77 billion, with 97% or US$3.67 billion being arrears of principal and interest, including penalties.
On the other hand, Non-Paris Club debt amounted to US$2.13 billion, with 25% or US$527 million being arrears and penalties. Official figures show that the total public and publicly guaranteed debt amounted to US$17.6 billion as at end September 2022, up from US$17.2 billion as at end December 2021.
This translates to a 2.3% increase. The increase, according to the authorities, was attributed to new disbursements for ongoing projects and Reserve Bank of Zimbabwe borrowing, as well as continuous accumulation of penalties.
The country’s domestic debt, the Treasury report shows, have been mainly driven by the weakening local currency.
As part of re-engagement with IFIs and other creditors, the Zimbabwean government in March 2021 resumed making quarterly token payments to the multilateral development banks, the World Bank Group (US$1 million), the African Development Bank Group (US$500 000) and the European Investment Bank (US$100 000).
Treasury also begun making quarterly token payments amounting to US$100 000 to each of the 16 Paris Club bilateral creditors in September 2021, as a sign of its commitment to the engagement and re-engagement process with the international community.
According to the new debt plan, Zimbabwe is exploring traditional debt relief options, especially the Highly Indebted Poor Country (HIPC) Initiative, which provides maximum debt relief for beneficiary countries and nonHIPC initiatives.
Treasury says Zimbabwe is also facing serious debt service capacity challenges — liquidity challenges, as reflected by low debt service ratios (actual debt service to revenue and exports), while at the same time accumulating arrears.