ZIMBABWE’S national debt poses a formidable challenge to sustainable economic growth and fiscal stability. As of September 2024, the nation’s total public and publicly guaranteed (PPG) debt stood at US$21,1 billion, comprising US$12,3 billion in external debt and US$8,7 billion in domestic debt.
This figure represents 59,7% of the country’s gross domestic product (GDP), underlining the urgent need for effective debt management strategies and structural reforms to foster growth and attract foreign investment.
Understanding the debt profile
Zimbabwe’s external debt is divided between bilateral and multilateral creditors. Bilateral debt amounts to US$6,3 billion, with 76% arrears and penalties.
Among these, Paris Club creditors hold US$4,1 billion, while non-Paris Club creditors account for US$2,2 billion.
Multilateral debt stands at US$3,2 billion, with arrears and penalties making up 84,4% (US$2,7 billion). The World Bank, African Development Bank, and European Investment Bank are the primary multilateral creditors, holding US$1,5 billion, US$671 million, and US$427 million, respectively.
Domestic debt primarily comprises government securities, including Treasury bills and bonds, amounting to US$5,1 billion. Additionally, the government owes US$3,5 billion in compensation to former farm owners.
These obligations significantly limit fiscal space, with high debt servicing costs reducing resources available for development.
Historical context of debt
The origins of Zimbabwe’s debt crisis lie in a combination of economic instability, sanctions, infrastructure spending, and currency volatility.
Hyperinflation during the 2000s devastated the economy, necessitating increased borrowing.
Sanctions and international isolation restricted access to concessional financing, forcing the government to rely on high-cost domestic and external borrowing.
Investment in infrastructure projects, while critical, often failed to generate sufficient returns to cover repayment obligations. The devaluation of the local currency in 2024 further compounded the debt burden, given that over 98% of Zimbabwe’s debt is denominated in foreign currency.
Current challenges in debt
Zimbabwe’s debt management faces multifaceted challenges that require urgent attention. The accumulation of arrears and penalties has significantly increased the debt burden, complicating efforts to renegotiate terms with creditors.
High debt servicing costs, which amounted to US$424,42 million in 2024, have constrained the government’s ability to allocate resources for social and economic development.
Persistent inflation and exchange rate fluctuations undermine investor confidence, while international isolation limits access to concessional loans. Furthermore, the shallow domestic bond market restricts options for financing fiscal deficits sustainably.
Strategic for debt resolution
Addressing Zimbabwe’s debt crisis necessitates a comprehensive approach that includes restructuring existing obligations, fostering fiscal discipline, and creating an investment-friendly environment.
Restructuring debt should involve renegotiating terms with bilateral and multilateral creditors to reduce arrears and penalties.
Leveraging international frameworks, such as the Paris Club agreements or the Heavily Indebted Poor Countries Initiative could provide critical relief.
Fiscal consolidation is essential to restoring stability. Policy measures should include broadening the tax base, formalising the informal economy, and rationalising public expenditure.
Transparency must also be prioritised. Regular publication of detailed debt reports, like the 2024 Public Debt Report, can rebuild market confidence and foster accountability.
Strengthening the capacity and mandate of the debt management office to oversee borrowing and repayments will further enhance public sector governance.
Economic diversification is another critical component. Reducing dependency on primary commodities such as tobacco and gold by investing in agriculture, manufacturing, and tourism can broaden revenue streams. Promoting value addition and beneficiation in these sectors can further enhance export revenues.
Lessons from experiences
Zimbabwe can learn from countries that have successfully navigated similar crises.
Ghana’s bond restructuring programme, supported by multilateral institutions, stabilised its economy and restored investor confidence. Argentina’s renegotiation with private creditors reduced its debt levels and opened avenues for renewed access to capital markets. Kenya’s use of public-private partnerships (PPPs) for infrastructure development minimised reliance on direct borrowing. These case studies highlight the importance of transparency, accountability, and international cooperation in effective debt management.
Creating a favourable climate
Tackling Zimbabwe’s debt challenges goes hand in hand with fostering an environment conducive to investment. Simplifying regulatory processes and establishing investor-friendly policies through Special Economic Zones can attract both domestic and foreign investors.
Ensuring political and economic stability with consistent fiscal and monetary policies is critical to building trust. Leveraging the financial potential of Zimbabwe’s diaspora by issuing diaspora bonds and providing investment incentives can also generate significant resources.
Strengthening institutions to enhance property rights and judicial efficiency will further bolster investor confidence. Adopting digital technologies to streamline governance and reduce corruption can create a secure and transparent environment for investment.
The benefits of debt management
Effective debt management and investment promotion can yield substantial benefits for Zimbabwe. Improved credit ratings will enhance access to international capital markets, while fiscal consolidation will help stabilise inflation and exchange rates.
Economic diversification and investment in productive sectors can create jobs and improve public services.
These reforms align with Zimbabwe’s Vision 2030, offering a roadmap for sustainable economic recovery and growth.
The path forward
Zimbabwe’s debt crisis, while daunting, presents an opportunity for transformative change. By embracing bold reforms and fostering international cooperation, the nation can turn its challenges into opportunities for economic renewal. Strategic debt management, coupled with an investment-friendly environment, holds the key to unlocking Zimbabwe’s vast potential and securing a brighter future for its people.
Data sources:
Zimbabwe Public Debt Management Office (2024 Public Debt Report, 2025 Annual Borrowing Plan).
Ministry of Finance and Economic Development.
IMF Debt Sustainability Analysis.
World Bank Ease of Doing Business Index.
(This article is part of a series aimed at fostering informed discussions on Zimbabwe’s economic policy.)
Chikosi, a former director at the World Bank, now serves as an independent director on the boards of prominent local and international companies. With a wealth of experience in global development and corporate governance, he is dedicated to fostering growth, driving sustainable solutions, and offering strategic insights into Zimbabwe’s economic challenges and opportunities.
