IMF warns Zimbabwe over fiscal slippages as domestic debt swells
LIVINGSTONE MARUFU
The International Monetary Fund (IMF) has warned Zimbabwe to tighten budget execution, strengthen cash and expenditure controls, maintain monetary discipline and accelerate governance reforms to enhance transparency and contain rising fiscal risks.
The warning comes as Harare accumulated US$1.7 billion in domestic debt over the past 12 months, largely due to over-contracting, adding pressure to the country’s already fragile public finances.
The mounting obligations to local contractors and service providers have significantly inflated Zimbabwe’s debt stock, which surged to approximately US$23.4 billion in 2025, up from US$21.2 billion at the end of 2023.
The IMF said the latest debt build-up stemmed from over-contracting driven by overly optimistic revenue expectations.
IMF representative Wojciech Maliszewski said the programme supports the authorities’ renewed commitment to prudent budget execution and sound expenditure controls.
“In line with the 2026 budget, spending in the first half of the year will be anchored on a conservative revenue outlook, helping ensure that expenditure remains aligned with available resources and avoiding the accumulation of new domestic arrears,” Maliszewski said.
He added that to reinforce fiscal discipline and transparency, authorities will strengthen domestic arrears monitoring through regular reporting and clearer institutional responsibilities.
“Improving cash planning and public financial management is another important element of the programme. The authorities will enhance institutional arrangements for cash management and improve short-term liquidity forecasting to support more predictable and credible budget execution,” he said.
Over the medium term, Maliszewski noted that broader public financial management (PFM) reforms—including stronger budget controls, improved capture of commitments and progress towards a Treasury Single Account—would improve the efficiency, transparency and discipline of public spending.
“The programme also supports structural reforms to strengthen governance and improve the management of fiscal risks. Following the publication of the inaugural financial statement, the Mutapa Investment Fund will take further steps to enhance transparency by publishing audited financial statements for all state-owned enterprises under its portfolio in line with the Public Financial Management Act,” he said.
He added that Mutapa Investment Fund would continue refraining from contracting debt without prior written approval from the Ministry of Finance, Economic Development and Investment Promotion.
Analysts concurred with the IMF’s emphasis on fiscal prudence, warning that continued expenditure overruns risk undermining economic stability.
Economist Enock Rukarwa said Zimbabwe must urgently rein in spending to sustain economic growth.
“When you look at over-contracting, it is not encouraging if that contracting is not backed by tangible fundamentals,” Rukarwa said.
“What is risky under the current circumstances is that the country has failed to secure external funding for government projects. The more projects we undertake, the more we are forced to fund them through seigniorage or monetary creation.”
He said the IMF’s call for Zimbabwe to live within its means was both positive and necessary.
“It fosters fiscal discipline, inflationary stability and limits exchange rate volatility, as the monetary system will not be disturbed by excessive over-contracting or unfunded government projects,” Rukarwa said.
Treasury officials have indicated that a significant portion of the US$1.7 billion domestic arrears remains unvalidated, meaning the government will undertake a rigorous audit to determine which contracts were legitimate and which were overpriced.
Another economist, Vince Musewe, warned that unpaid contractor debts are crippling business sustainability and long-term growth.
“Government has failed to pay local service providers to the tune of US$1.7 billion according to the 2026 budget statement. Imagine the damage that does to business,” Musewe said.
The IMF’s warning comes as Treasury pledged to dismiss officials found to have processed or approved unvalidated expenditure, as part of efforts to curb leakages and strengthen accountability in public finances.
The accumulation of US$1.7 billion in unvalidated arrears over the past year has left the State dangerously exposed to liquidity pressures, rising debt vulnerabilities and growing reputational risks.
