Government borrowing drives domestic credit

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ZIMBABWE’S domestic credit grew by 22,79 percent in the third quarter of 2023, reaching $13,2 trillion, according to data from the Reserve Bank of Zimbabwe (RBZ).
This growth was fuelled primarily by a $2,9 trillion increase in net government borrowing, which rose from a negative $321 million in June to a positive $2,6 billion by September.
While government borrowing skyrocketed, credit extended to other sectors of the economy declined, slipping from $11,1 trillion to $10,6 trillion.
This comes as Zimbabwe’s public and publicly guaranteed (PPG) debt burden remains substantial. As of September 2023, total PPG debt stood at a staggering $96,7 trillion, representing 81,3 percent of GDP.
This comprises $69,4 trillion in external debt and $27,4 trillion in domestic debt, equivalent to 58,3 percent and 23 percent of GDP, respectively.
In US dollar terms, total PPG debt amounted to US$17,7 billion, with external debt making up US$12,7 billion — 72 percent — and domestic debt US$5 billion, or 28 percent.

To address the debt issue and unlock new financing avenues, the government has established a structured dialogue platform (SDP) with creditors and development partners.
This platform, championed by African Development Bank (AfDB) president Akinwumi Adesina and former Mozambique President Joaquim Chissano, aims to institutionalise dialogue on economic and governance reforms, paving the way for arrears clearance and debt resolution.
The SDP talks are expected to resume this month, and Finance minister Mthuli Ncube has expressed optimism about their potential to unlock international lines of credit.
He also mentioned ongoing negotiations for new budget financing and lines of credit with BADEA, IFAD, and OFID.
Additionally, the government is exploring innovative ways to mobilise domestic resources for infrastructure development. This includes leveraging and ring-fencing US dollar-denominated revenues, potentially reducing reliance on external borrowing.
This also comes as Ncube has recently revealed that Zimbabwe is using proceeds from platinum exports to repay a US$400 million loan secured from the African Export-Import Bank (Afreximbank).
This loan, Ncube stated, played a crucial role in financing the country’s budget deficit, given its limited access to international lines of credit.
The Afreximbank loan was lauded as a major achievement, marking a significant shift after two decades of restricted access to external finance.
The loan is being repaid with 35 percent of Zimplats’ export proceeds, managed by the RBZ.
Meanwhile, the latest data on lending showed that within the private sector, households and agriculture received the largest share of credit, accounting for 23,31 percent and 16,77 percent respectively. Manufacturing and distribution followed, receiving 16,74 percent and 9,44 percent of the total credit.
Private sector credit was mainly used for recurrent expenditures, inventory build-up, and fixed capital investments.