Zimbabwean Finance Minister Mthuli Ncube says Harare will do all it can to clear its foreign debt by December 2025 to open fresh lines of credit that would help in revamping the floundering economy.

According to a debt bulletin released by the treasury, Zimbabwe’s total public and publicly guaranteed debt was $18-billion in December 2022, made up of $12.8-billion in foreign debt and $5.2-billion in domestic debt.

Of the external debt, $5.89-billion is bilateral debt – owed to other countries – whereas $2.7-billion is multilateral debt – borrowed from lenders such as the International Monetary Fund (IMF), the World Bank and the African Development Bank (AfDB). Most of what Zimbabwe owes these lenders, $2.47-billion, is arrears and penalties for not paying.

Ncube said Zimbabwe was committed to servicing its debt despite the country’s poor economic performance over nearly three decades. “I met representatives of the IMF and the World Bank in the US, where we agreed on a framework for us to repay our debts. We are hopeful that we will have cleared all our debts with international lending institutions and countries that we owe at the end of 2025.”

Since getting its special drawing rights allocation from the IMF in 2021, Zimbabwe has made six drawdowns of $857-million in total. The money was mostly used to finance health, agriculture and infrastructure development projects such as road rehabilitation.

Zimbabwe also owes money to international financial institutions such as the European Investment Bank, China Eximbank, the Paris Club and Sinosure, which provides export credit insurance to Chinese companies.

Zimbabwe started a campaign last year, led by the AfDB, to push for a debt restructuring deal with its major creditors. It owes China $2.03-billion, which was mostly used for infrastructure. But many Chinese-funded projects slowed down in 2022 because President Emmerson Mnangagwa’s administration was not servicing its debts fast enough, though it later paid $18-million to China Eximbank and the same amount to Sinosure.

This resulted in $156.73-million being unlocked to fund the completion of two new units at the Hwange Thermal Power Station, refurbishment of the Robert Gabriel Mugabe International Airport terminal and cellular network provider NetOne’s fibre project.

India also chipped in with $18-million that was used to build a water supply line to the new power units at Hwange.

‘Good money runs away from bad money’

Zimbabwe’s central bank has also racked up a debt of US$4-billion to banks and companies that relates to the supply of food, fuel and other goods and services. However, the government hopes to harness more funds from corn exports that could be used to finance its foreign and domestic debt as the country recorded a surplus.

Despite the ambitious plans to clear the debt by 2025, critics such as Munyaradzi Bwanya, the chief of staff in independent presidential hopeful Saviour Kasukuwere’s campaign team, believe the country will not be able to attract foreign direct investment if there is no adherence to the rule of law.

“Good money runs away from bad money. If our own entrepreneurs are in the habit of running away from their home country, it would be very unlikely that a sensible person from a noble country would want to come and invest here,” said Bwanya.

“We have had a good wave of Chinese investments, but their investments, for example in the diamond sector, are opaque and lack clarity. The World Bank, the IMF and the Paris Club have discontinued loans to us because we stopped paying. They regard us as a bad debtor.”

Harare mayor Jacob Mafume, who belongs to the main opposition Citizens Coalition for Change (CCC) led by Nelson Chamisa, said Zimbabwe should craft economic policies that would enable it to reassert its position in the family of nations.

“We have to rejoin the Commonwealth… We need to deal with security of investments and we have to be consistent in terms of our monetary policies. We can’t have monetary policies that shift like offal in a dish, where policy changes are made from people’s offices through press statements,” said Mafume.

“This is kindergarten and yo-yo economics must be put to a stop because we need predictability and certainty in the economy.”

However, Zanu-PF’s acting information director, Farai Marapira, said Mnangagwa’s re-engagement drive with the international community after several years of isolation was beginning to bear fruit.

“The president has instituted a raft of changes through the Transitional Stabilisation Programme and the National Development Strategy 1, and through a radical shift in our foreign policy of being a friend to all and an enemy to none.

“This has seen massive investment coming into Zimbabwe. For example, we have set up the Manhize steel plant, which will be opening its doors on 1 December. Zimbabwe will be a net exporter of steel – it will be producing four million tonnes and above.

“All the companies that invested in Zimbabwe have been expanding their operations. Unki mine has expanded its furnace from 178,000 to 220,000 tonnes per month.

“This is all foreign direct investment; we have got all nations coming back. We have $5-billion worth of investment coming from the Chinese, the Germans and all over the world,” said Marapira.

He added that Zimbabwe should service its foreign debt by ensuring that all sectors of the economy are productive.

“We cannot service debts by taking other debts. We have to build our economy by making ourselves productive, thereby making ourselves net profit earners.” DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.