ZIMBABWE is trailing regional neighbours in real gross domestic product, with the growth rate expected to slow to 3.2% in 2024 and 2025, amid a blighting socio-economic crisis, new statistics by the International Monetary Fund (IMF) have shown.
NATHAN GUMA
This is a 0.3 percentage point drop from the 3.5% projected for 2024 in November last year by Finance minister Mthuli Ncube, mainly attributed to the El Niño-induced drought.
While economic growth has been projected to drop significantly, the country is still lagging behind regional neighbours, who are expecting a huge leap in 2024 and 2025.
For instance, Zambia’s economy is projected to grow by 0.1 percentage points from 4.7% to 4.8% in 2024 and 2025, while Mozambique is projected to be constant at 5% in the same periods.
The Democratic Republic of Congo (DRC) is forecast to grow by one percentage point from 4.7% to 5.7%, while Malawi is projected to grow by 0.5 percentage points from 3.3% to 3.5%. Regional powerhouse South Africa is expected to improve in 2025, after a massive drop in 2023 and 2024.
South Africa’s growth rate for 2024 was pegged at 0.9% which is projected to rise by one percentage point to 1.9% in 2025.
The new statistics have also shown that Zimbabwe still has a high debt overhang, with the government debt (percent of GDP) still over 80%. On average, a government debt percentage that is above 50% shows that a government is in a weak position to service debt.
The country’s government debt percentage for 2024 and 2025 is projected to be pegged at 98.5% and 86.5% respectively. In 2022, it reached 100.6% in 2022.
Zimbabwe’s public debt has largely been driven by arrears and penalties on existing debts, amid calls for the country to implement targeted economic, governance, and land-related reforms.
The country’s total debt soared to US$18.03 billion as of December 2022 from US$17.2 billion, with external debt constituting 70.9% (US$12.8 billion or ZW$8.78 trillion) while domestic debt constitutes 28.7% (US$5.2 billion or ZW$3.56 trillion).
With no budgetary support from traditional lenders such as international financial institutions due to non-payment of arrears, Zimbabwe has been mainly relying on grants, bilateral loans and domestic resources to finance its key capital projects.
The country has been failing to access lines of credit from key multilateral development banks, including the African Development Bank (AfDB), the World Bank, and the European Investment Bank.
In 2022, President Emmerson Mnangagwa admitted that a huge debt overhang is weighing on the economy, during the Second Structured Dialogue Platform Meeting on the Arrears Clearance and Debt Resolution Process.
Sub-Saharan region
According to the report, the overall regional outlook is gradually improving, with economic activity tepidly picking up.
“Growth will rise from 3.4 percent in 2023 to 3.8 percent in 2024, with nearly two thirds of countries anticipating higher growth. Economic recovery is expected to continue beyond this year, with growth projected to reach 4.0 percent in 2025. In parallel, median inflation has almost halved from nearly 10 percent in November 2022 to about 6 percent in February 2024.”
The report has also projected the funding squeeze to continue, as the region’s governments continue to grapple with financing shortages, high borrowing costs, and rollover risks amid persistently low domestic resource mobilization.
“Significant debt repayments are looming this year and next. The financing challenges are forcing countries to cut essential public spending and redirect development funds to debt service, thereby endangering growth prospects for future generations,” it reads.
“The funding squeeze partly reflects a reduction in the region’s traditional funding sources, particularly Official Development Assistance. Gross external financing needs for low-income countries in sub-Saharan Africa are estimated to exceed $70 billion annually (six percent of GDP) over the next four years.
“As concessional sources have become scarcer, governments are seeking alternative financing options, which are typically associated with higher charges, less transparency, and shorter maturities”
IMF has also projected the cost of borrowing — both domestic and external — to increase.
In 2023, government interest payments took up 12% of its revenues (excluding grants) for the median sub-Saharan African country, more than doubling from a decade ago. The private sector has also started to feel the pinch from higher interest rates.
