GLOBAL borrowing costs – of between eight to 12 percent – have impacted Zimbabwe’s economy to a point of compounding its debt situation, officials say.
This comes as recent statistics released by the Finance ministry have shown that total public and publicly guaranteed debt has jumped to US$21 billion in 2023 – as compared to US$18 billion the prior year – amid fears that this could add to economic distress.
“A few years ago, we used to borrow… at something like eight percent per annum in terms of access to capital. Right now, we are borrowing at about 12 percent…This has nothing to do with the credit rating of the country, and every other country can tell a similar story,” Ncube said at the SADC Industrialisation Week this week.
“We need 40-year capital, not 10-year capital. So capital should be provided at scale, more concessionary, more accessible, and more long term,” he said in emphasising the need for long-term, concessional financing across Africa.
Mthuli Ncube, Finance Minister
This increase is attributed to tightened credit markets, which are impacting developing countries’ ability to secure affordable financing for critical investments and development goals.
High debt vulnerabilities are widespread among developing countries, highlighting the need for debt restructuring and relief programs.
Ncube called for reforms to the G20 Framework, suggesting, “In fact, we have argued in other forums globally that the G20 Framework needs to be reformed so that when a country enters the process or begins restructuring, all interest payments should be suspended so that it can fund other programmes while restructuring its debt.”
The country is actively working on debt clearance with the support of the African Development Bank and former Mozambican president Joaquim Chissano.
And Jane Morley, the head of sub-Saharan Africa country risk at Fitch Solutions, cautioned that rapid debt relief is unlikely.
“While the authorities are in talks with multilateral and Western lenders to regain access to concessional credit, we expect limited progress on this front over the short term, not least because of the US’s exit from the discussions, and insistence that reforms are necessary before it will re-join,” she said.
“The process depends on strong performance under a Staff Monitored Program with the International Monetary Fund, which has not yet begun, and on the clearing of arrears to multilateral institutions, which will require bridge financing of US$2 billion that the government aims to obtain within 18 months (by late 2025),” Morley said.
The southern African nation’s debt translates to a debt-to-GDP ratio of 96,7 percent, indicating a precarious financial position for the country.
According to the latest public debt report, the country’s debt comprises external debt stock amounting to US$13 billion and domestic debt stock of US$8,1 billion.
Out of the external debt, 48 percent at US$6,2 billion in bilateral debt, while US$3,1 billion in multilateral debt at 24 percent and US$3,7 billion is Reserve Bank of Zimbabwe liabilities assumed by treasury.