Zimbabwe: The Critical Challenges of External Debt Restructuring
As Zimbabwe faces a colossal external debt of $12.7 billion, representing 81% of its GDP, President Emmerson Mnangagwa and financial stakeholders met to discuss strategies to clean up the country’s economic situation and restructure arrears.
The challenge ahead is daunting for a country marked by recurring financial crises, such as hyperinflation and failed monetary reforms. In this context, Zimbabwe is currently negotiating a Staff Monitoring Program (SMP) with the International Monetary Fund (IMF), paving the way for critical policy reforms. Akinwumi Adesina, President of the African Development Bank (AfDB), expressed the AfDB’s readiness to provide financial support for these reforms and help clear arrears.
The timeline for debt restructuring is expected to become clear by mid-2025, when Zimbabwe hopes to secure bridging financing from lenders. Analysts warn that clearing arrears is crucial to the country’s economic recovery. Currently, Zimbabwe is cut off from IMF funding due to its debt situation.
Debt relief with major creditors, such as the AfDB, the World Bank and the European Investment Bank, is critical to unlocking future financing. The IMF is unable to provide financial support due to Zimbabwe’s unsustainable debt.
While the SMP does not guarantee immediate financial support from the IMF, it would mark a return to sound economic policies. The complexity of Zimbabwe’s debt situation, with a large share of debt in arrears and penalties, limits access to international financial assistance.
In this context, transparency in negotiations, determination to implement effective reforms and collaboration with international financial institutions are essential to stabilise Zimbabwe’s economy and pave the way for a more promising future.