Growing debt will engulf Zimbabwe

Treasury said this week that it will borrow money from both domestic and foreign sources to cover the ZWL$9.2 trillion shortfall in the country’s total budget financing. This move will put the nation even more in debt.

We are raising the alarm about the nation’s spiraling debt, which is expected to submerge Zimbabwe’s already precarious economy to an unprecedented degree of debt concentration.

Professor Mthuli Ncube, the Minister of Finance, Economic Development, and Investment Promotion, stated that the budget deficit, loan amortization, and maturing government securities will be funded by the issuance  of Treasury bills (TBs), bonds, and external loans from supportive institutions.

The latest plan is concerning since the administration is unable to pay off the already unmanageable US$17.7bn in debt with multiple loan institutions.

We are concerned that this will push the public debt to unimaginable levels, even though the Treasury has stated that it will make sure the government’s needs and payment obligations are met at the lowest feasible cost over the medium to long term, with a prudent level of risk, and to support the development of the domestic debt market.

However, the fiscal authorities stated that they will evaluate the risk and expense of borrowing money from the government and servicing that debt.

The Treasury stated in its 2024 borrowing annual plan statement that it hopes to assist in the growth of a strong and effective domestic debt market.

The Treasury said the Annual Borrowing Plan (ABP) is based on marketable domestic debt instruments and external loans for the period  January 1 to  December  31 2024, and is underpinned and consistent with the Medium-Term Debt Management Strategy (2022-2025) and the ABP will undergo a semi-annual review to ensure alignment with evolving macroeconomic and market trends.

Regarding outside funding, Professor Ncube stated that the goal is to give preference to concessional financing and restrict non-concessional borrowing to projects that are economically feasible.

The government anticipates that the sustained use of the auction system, the anticipated stability of the macroeconomic environment, and the greater transparency of the issue of government securities will all contribute to the success of its borrowing plan.

The Treasury is concerned about high borrowing costs because of the refinancing risk, which lenders believe to be higher, and the weak investor base because of the lack of access to foreign markets.

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