Resolving debt will spur economy: Analysts
RESOLVING the country’s debt and clearing outstanding arrears could help spur both economic growth and the ongoing infrastructure development drive, analysts have said. Preparations for resumption of the structured dialogue platform on the country’s debt and arrears are presently underway.
On January 19 this year, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube, together with his deputy Mr David Mnangagwa, joined diplomats, Reserve Bank of Zimbabwe officials, heads of ministries, departments and agencies, as well as the private sector in Harare for a strategic planning meeting for the structured dialogue platform.
Through its handle on X, Treasury indicated that the process will focus on economic, governance and land tenure reforms.
Former Mozambican President Joaquim Chissano and head of the African Development Bank (AfDB) Dr Akinwumi Adesina were appointed the high-level facilitator and champion of the process, respectively.
Economist Dr Prosper Chitambara said clearing the country’s debt would be “a strategic move”.
“Zimbabwe’s debt situation is a significant impediment to its economic progress. Clearing this debt is not just a financial imperative but a strategic move to create a conducive environment for sustained infrastructure development,” he said.
“Zimbabwe needs a well-structured debt management plan that not only addresses the immediate concerns but also lays the foundation for responsible fiscal policies in the future. This will instil confidence among investors and development partners.”
Ms Gladys Shumbambiri-Mutsopotsi, another economist, said investors were likely to take a cue from a successful debt resolution programme.
“Investors closely monitor a country’s fiscal responsibility before committing to long-term infrastructure projects,” she said.
“Resolving the debt issue sends a positive signal, potentially unlocking avenues for much-needed funding in critical sectors …
“Zimbabwe has immense potential for economic growth, and resolving the debt issue can unlock that potential. Investors are watching closely, and a successful resolution could lead to a renewed interest in Zimbabwe as a viable investment destination.”
According to Treasury, the country’s total external debt was estimated at US$14,04 billion as at September 2023, including US$5,7 billion of bilateral debt, which is 41 percent of the total amount, and US$2,6 billion of multilateral debt, which constitutes 18,4 percent of the overall debt.
RBZ debt, which represents 24 percent of external debt, is US$3,4 billion, and US$2,3 billion (16,6 percent) is made up of blocked funds.
Of the total bilateral external debt of US$5,7 billion, Paris Club debt amounts to US$3,6 billion, while US$2,2 billion is owed to NonParis Club creditors.
Of the total external debt of US$8,3 billion, excluding RBZ debt and blocked funds, principal and interest arrears and penalties represent 76 percent or US$6,3 billion.
The bulk of the external debt stock is made up of principal arrears of US$2,7 billion, interest arrears of US$1,6 billion and penalties of US$2,1 billion, while the debt outstanding and disbursed accounts for US$2,03 billion.
Zimbabwe has been making token payments to all its foreign creditors, among them the Paris Club, which has 17 members, the World Bank and the AfDB.
An economic analyst, Mr Namatai Maeresera, said resolving the country’s debt could lead to improved credit ratings.
“A positive credit rating is a gateway to accessing funds at favourable terms. This, in turn, can pave the way for increased infrastructure lending, which is pivotal for economic growth and development,” he said.
Ms Yvonne Chifamba, a development practitioner, emphasises that infrastructure development is not just about economic growth, but enhancing the overall quality of life of the people.
“Improved roads, energy and healthcare facilities contribute to a healthier and more prosperous society,” she said.
Government has taken significant steps to engage creditors. Overall, analysts are agreed that the success of the country’s debt resolution and arrears clearance programme would not only attract capital for infrastructure projects but also lay the groundwork for a more prosperous and sustainable future for the nation and its people.