BERNARD MPOFU
ZIMBABWE’S economy has largely stagnated over the last 20 years as the country’s ballooning debt continues to choke the southern African nation, a new report by the African Development Bank (AfDB) has shown.
Official figures show that despite making token payments over the past few years, Zimbabwe’s total debt stock has soared to US$18 billion as of December 2023.
The country went into arrears at the turn of the millennium.
Early this year, the Finance ministry resumed negotiations with creditors and the international community as Treasury seeks to resolve Zimbabwe’s nagging debt overhang.
With the country remaining in debt distress while borrowing is limited, public debt has continued to increase, driven by external arrears and legacy debt.
“The economy has experienced only minimal structural transformation in the last two decades, with structural change impeded by crippling public debt accumulation estimated at 87% of GDP in 2023,” the AfDB says in its continental economic outlook for 2024 published recently.
“The services sector has remained the major contributor to GDP over the last decade, averaging over 50% since 2010 and reaching 55% in 2023. Persistent socio-economic pressures led to human capital flight of an estimated 3 million mostly skilled workers. Labour shifted from higher value-added sectors, such as agriculture, industry, and high-productivity services, to lower value-added sectors, including wholesale and retail trade.”
Zimbabwe’s labour productivity growth, the report states, remains depressed and ranked very low among 17 lower middle-income countries in Africa.
“Prerequisites for Zimbabwe’s structural transformation are debt restructuring and clearance of arrears to create fiscal space for investment, attract foreign direct investment, and unlock access to global financing opportunities,” the report reads.
“Since 2022, the country has engaged with the international development community and has agreed to implement economic and governance reforms that would unlock arrears clearance. Zimbabwe’s main creditors, including multilateral and bilateral donors, which account for 76% of its debt, have a key role in accelerating agreed reforms and arrears clearance.”
Structural transformation of the economy refers to a process of change in the underlying structure of a country’s economy, moving away from traditional or old industries and towards new, more modern and dynamic sectors.
This transformation aims to diversify the economy, increase productivity and competitiveness, reduce dependence on a single industry or resource and promote sustainable economic growth and development.
Experts say structural transformation includes moving from an agrarian to an industrial economy; shifting from a reliance on natural resources to knowledge-based industries; transitioning from a manufacturing-based economy to a service-based economy and embracing digitalisation and the fourth industrial revolution.
The goal is to create a more resilient, inclusive and innovative economy, driving economic growth and improving living standards.
