ZIMBABWE’S failure to service approximately US$13 billion in foreign debt has hampered access to a crucial European Union (EU) funding facility designed to address Africa’s energy crisis and support economic recovery, a top EU diplomat has revealed.
The country’s total debt burden stands at US$21 billion, owed to both domestic and international creditors, including the World Bank, the African Development Bank (AfDB), and the Paris Club.
This growing debt profile has elevated Zimbabwe’s risk status, discouraging fresh credit lines and foreign investment.
Harare has consistently attributed the crisis to Western sanctions imposed by the United States and EU over two decades ago.
President Emmerson Mnangagwa’s government estimates these measures have cost the economy approximately US$100 billion in lost opportunities.
However, EU Ambassador to Zimbabwe, Jobst von Kirchmann, stated in an interview with the Zimbabwe Independent that despite these challenges, Zimbabwe still has opportunities, such as the EU-Africa Global Gateway Investment Package, provided it successfully addresses its debt crisis.
Von Kirchmann clarified that the €150 billion (US$160 billion) Global Gateway fund is not affected by political sanctions, but was inaccessible to Zimbabwe due to its substantial arrears.
“The Global Gateway Fund has absolutely nothing to do with restrictions,” von Kirchmann told the Independent.
- Mr President, you missed the opportunity to be the veritable voice of conscience
- ED to commission new-look border post
- Zanu PF ready for congress
- EU slams Zim over delayed reforms
Keep Reading
“However, limitations in the use of Global Gateway resources are linked to the fact that Zimbabwe currently has US$21,7 billion in arrears and debt. I always commend the initiative by His Excellency the President to resolve the arrears and debt through the arrears clearance platform. We actively support that and stand ready to continue supporting Zimbabwe to achieve this, because it will open the door for sovereign lending,” he added.
While Zimbabwe is locked out of the EU funding mechanism, neighbouring South Africa last week secured a €4,7 billion (US$5 billion) Global Gateway package for investment and trade.
The agreement was finalised at the EU-South Africa Summit in Cape Town, attended by European Commission President Ursula von der Leyen, South African President Cyril Ramaphosa, and European Council President António Costa.
South Africa thus became the first African country to benefit from the Global Gateway initiative.
Launched in 2021, the EU-Africa Global Gateway Investment Package aims to drive Africa’s green, digital, and economic transformation.
The initiative seeks to accelerate renewable energy capacity by at least 300 gigawatts by 2030, while fostering digital infrastructure, sustainable economic growth, job creation, health system improvements, and enhanced education and training.
It aligns with African strategies, particularly Agenda 2060, and is jointly implemented through Team Europe initiatives, in collaboration with the African Union Commission, regional economic organisations, and individual African nations.
Zimbabwe’s mounting debt has been a formidable obstacle to economic recovery.
Analysts argue that a combination of loose fiscal and monetary policies, marked by high inflation and deeply negative real interest rates, has exacerbated the crisis, discouraging investment.
Christopher Mugaga, chief executive officer of the Zimbabwe National Chamber of Commerce, warned of dire economic consequences stemming from the debt trap.
“In 2009, local currency debt was written off following dollarisation,” Mugaga said.
“Today, however, this is not an option. The situation is different now because 95% of the total debt is denominated in foreign currency and cannot be written off.”
He said over the past year, largely due to currency devaluation, Zimbabwe’s public debt in local currency terms had surged 13-fold to US$21 billion, equivalent to 130% of the country’s gross domestic product (GDP).
“Servicing this debt will absorb approximately 40% of total government revenue in 2024,” Mugaga said.
“Since this is unaffordable, the government will have to choose between allowing arrears to accumulate further and negotiating a debt-restructuring agreement with creditors. This problem is becoming increasingly urgent.”
In 2022, Zimbabwe launched a debt clearance process led by the AfDB, following the gradual easing of EU sanctions imposed in 2002.
However, global creditors, including the EU, insist that meaningful reforms must be implemented before the country can clear its arrears and restore financial credibility.
A key sticking point in the negotiations has been Zimbabwe’s Private Voluntary Organisations (PVO) Amendment Bill, which creditors argue undermines constitutional rights and stifles civil society. During the 6th High-Level Structured Dialogue on Zimbabwe’s debt arrears in Harare last year, von Kirchmann emphasised the importance of reconsidering the Bill.
“The PVO Bill today was mentioned several times,” he told delegates at the meeting.
“I would like to make this pledge to His Excellency, the President in his wisdom to reconsider that Bill. My understanding is that the civil society is not against being regulated but that should be done in a fair and transparent way.”
The Bill is just one of several reforms demanded by international creditors.
Negotiators have repeatedly stressed that Zimbabwe must commit to political and electoral reforms and demonstrate tangible progress towards holding free and fair elections.
Moreover, compliance with conditions outlined in the Zimbabwe Democracy and Economic Recovery Act, a US law, is seen as critical for unlocking financial support from Western creditors.
