ZIMBABWE has emerged as the outlier within the region as the country battles with a huge debt overhang currently retarding economic development, a new report by the African Development Bank (AfDB) has shown.
BERNARD MPOFU
Official figures show that Zimbabwe’s total public debt amounts to US$17.69 billion (81.3% of gross domestic product) as of 30 September 2023 . External debt stands at US$12.69 billion (58.3% of GDP) and domestic debt at US$5.0 (23% of GDP).
Multilateral debt amounts to US$3.1 billion, while bilateral debt amounts to US$6.0 billion. Arrears and penalties amounting to US$7 billion or 32% of GDP represent 76% of total multilateral and bilateral debt.
“Zimbabwe is currently the only Regional Member Country (RMC) that is in arrears with the Bank,” a new report by the regional bank reads.
“As of 31st December 2023, Zimbabwe’s debt to the AfDB amounted to US$755.48m (about 2.0% of GDP). Since 2022 the AfDB has been leading Zimbabwe’s arrears clearance and debt resolution process, which is aimed at finding solutions to the country’s debt challenges. The country’s debt position remains unsustainable and continues to strain the implementation of the National Development Plan 1.
“The long outstanding debt and accumulated arrears has negatively impacted the country and its people. This has manifested in limited progress in human development.”
The monetary policy, the AfDB says, remains a major source of macroeconomic instability.
The country has a multi-currency monetary policy with the US dollar and Zimbabwe dollar as the main official currencies for domestic transactions.
The US dollar is the preferred currency, especially as a store of value. An auction-based exchange rate system is in place, but the shortages of foreign currency have given rise to a flourishing parallel market, resulting in wide premiums between the official rates and parallel market rates.
Since 2022 the economy has also been characterised by high inflation that reached a peak of 285% in June 2022, mainly triggered by exchange rate depreciation.
In 2023, the government introduced a blended inflation rate that combines US$ and ZW$ prices on a ratio of 80% to 20%, for US$ and ZW$, respectively, and rebased its inflation estimates to the year 2020.
This change in inflation measurement resulted in a significant reduction in officially recorded inflation rates. The annual blended inflation stood at 34.8% in January 2024 from 175.8% in June 2023.
According to the Government Public Debt report of November 2023, the country’s total public debt amounts to US$17.69 billion (81.3% of GDP) as of 30 th September 2023.
The government has committed to clearing its arrears with multilateral and Paris Club creditors.
In December 2021, the government adopted the Arrears Clearance, Debt Relief and Restructuring Strategy (ACDRRS) to help resolve the longstanding debt challenges.
In 2022, the government adopted the Central Pin Strategy (CPS) to implement the ACDRRS and to strengthen re-engagement with the international community.
The CPS has three pillars, namely economic reforms, political reforms, and government’s commitments to compensate former commercial farmers, including the Bilateral Promotion, Partnership Agreement (BIPPA) farmers whose farms were acquired under the fast-track land reform programme.
The AfDB through the Transitional Support Facility (TSF) is providing technical assistance and advisory support on arrears clearance and debt resolution to the GoZ.
Upon request from President Mnangagwa, AfDB president Akinwumi Adesina led this process, while the former president of Mozambique Joaquim Chissano is the facilitator.
