Mthuli eyes US$2.6bn bridge financing

SAMANTHA MADE

Treasury is pursuing a critical US$2.6bn bridge financing facility, which Finance and Economic Development Minister Mthuli Ncube expects to be finalised by the first quarter of 2026.

If secured, the deal could represent a turning point in Zimbabwe’s protracted efforts to clear external arrears, re-engage with international creditors, and end more than two decades of financial isolation.

“We expect that by the first quarter of next year, this bridge financing will be in place,” Professor Ncube told Business Times, a market leader in business, financial and economic reportage.

He added: “It is a very important step in our re-engagement efforts and in restoring Zimbabwe’s financial credibility.”

As of December 2024, Zimbabwe’s total public and publicly guaranteed debt stood at US$21bn.

This includes external debt of US$12.2bn and domestic debt of US$8bn.

Of the multilateral debt, US$676m is owed to the African Development Bank (AfDB), US$1.6bn to the World Bank, and US$425m to the European Investment Bank.

Paris Club creditors are owed approximately US$4bn, while non-Paris Club creditors are owed US$2.2bn.  The balance is owed to other international creditors.

Zimbabwe’s total arrears stand at an estimated US$7.4bn.

The unsustainable debt burden has exacerbated Zimbabwe’s economic crisis and left the nation in a state of debt distress.

The country’s limited financial resources are insufficient to support its ambitious development agenda, and failure to resolve the debt situation threatens to deepen economic instability.

Zimbabwe’s debt woes trace back to the 1980s when the government embarked on an aggressive public spending spree aimed at stimulating economic growth through rapid development expenditure.

However, for the past 24 years, the country has either neglected debt servicing or made only token payments. This has severely limited the government’s ability to access external loans, with most creditors unwilling to lend without guarantees.

The accumulation of external payment arrears prompted the International Monetary Fund (IMF) to declare Zimbabwe ineligible for its general resources account. Other global lenders, including the World Bank, the AfDB, and members of the Paris Club, followed suit, suspending disbursements and denying the country access to new funding.

Analysts told Business Times this week that the country’s economic turmoil has intensified as it continues to navigate treacherous financial waters. Zimbabwe’s exclusion from international capital markets has forced the government to rely almost entirely on domestic borrowing, which significantly limits investment opportunities at a time when financial resources are urgently needed to achieve the country’s Vision 2030 goals of attaining middle-income status.

While borrowing from the domestic market mitigates foreign exchange risk, it also risks crowding out private sector investment—slowing growth as government borrowing tends to be less efficient unless directed toward enabling infrastructure.

The proposed bridge financing is aimed at clearing arrears with key international financial institutions, including the World Bank and AfDB.

It represents the final push in a long-running debt resolution effort that has stifled Zimbabwe’s economic development.

Once arrears are cleared, Zimbabwe could regain access to concessional loans, structured debt relief mechanisms, and long-term development funding—all of which have been inaccessible since the early 2000s.

According to the Ministry of Finance, Zimbabwe’s arrears primarily stem from defaults in the early 2000s, driven by political instability and fiscal mismanagement. This led to the country’s suspension from borrowing windows at major multilateral institutions and a sharp decline in foreign direct investment.

“Our inability to access concessional finance and development support has significantly limited our capacity to grow the economy, invest in infrastructure, and create employment opportunities,” Professor Ncube said.

The debt resolution initiative is being spearheaded by AfDB President Akinwumi Adesina, with support from former Mozambican President Joachim Chissano, who serves as High-Level Facilitator in the creditor and stakeholder engagements.

Adesina has described Zimbabwe’s arrears as “the missing piece in Zimbabwe’s economic recovery puzzle.”

He has played a leading role in promoting the structured dialogue platform, which aligns international support with governance, economic, and institutional reforms. These include fiscal transparency, respect for human rights, and adherence to democratic norms.

“This is not just about Zimbabwe,” Adesina recently said. “It is about restoring confidence in African economies and unlocking the continent’s full growth potential.”

The debt crisis has also severely impacted the private sector, which continues to suffer from liquidity constraints and prohibitively high borrowing costs. Lenders remain cautious due to Zimbabwe’s unresolved sovereign risk.

“Until Zimbabwe clears its arrears, it cannot access affordable, long-term funding,” said economist Ashton Sibanda. “This restricts investments in infrastructure, agriculture, and industrial development that are crucial for sustainable growth.”

Investment analyst Tafadzwa Zhou echoed the concern: “Clearing arrears is the key to unlocking concessional loans from the World Bank and other institutions. This will provide the financial resources needed to stimulate growth in vital sectors such as manufacturing and agriculture.”

International creditors and donors have emphasized that Zimbabwe must deliver credible and consistent reforms to rebuild trust and secure sustained financial support.

“There are deliverables we must meet,” Professor Ncube acknowledged. “We understand the scale of the work required, and we are determined to rebuild trust with our partners through consistent reform efforts.”

As part of its reform agenda, the government has implemented several initiatives, including a foreign currency auction system to stabilize the exchange rate, and fiscal consolidation measures such as tax reforms aimed at broadening the revenue base. However, implementation challenges persist, and many of the structural issues that triggered previous economic crises remain unresolved.

With annual inflation at 92% as of May 2025—among the highest on the region—and continued depreciation of the Zimbabwean dollar, informal dollarization has intensified, complicating efforts to manage monetary policy and stabilize prices.

Years of isolation have also taken a toll on social infrastructure. Public hospitals, schools, and transport systems remain underfunded, while poverty remains deeply entrenched, especially in rural areas.

Professor Ncube insists that the government’s reform efforts are not only aimed at restoring economic stability but also at meeting urgent social needs. “Our approach balances economic reforms with social protection to safeguard the vulnerable,” he said. “Sustainable development must benefit all Zimbabweans.”

Over the years, Zimbabwe has made several attempts to address its debt overhang.

Between 2001 and 2008, it implemented a Domestic Debt Restructuring policy, which failed due to poor economic performance. In 2010, it launched the Sustainable and Holistic Debt Strategy, which also fell short.

Another attempt came in the form of the Zimbabwe Accelerated Arrears Clearance Debt and Development Strategy, which explored the possibility of debt relief through the Heavily Indebted Poor Countries (HIPC) initiative and aimed to leverage mineral resources for sustainable development.

In October 2015, the government introduced the Lima Strategy, a non-HIPC framework intended to clear US$1.8bn in arrears to the IMF, World Bank, and AfDB, as a precursor to seeking debt treatment from the Paris Club.

Zimbabwe eventually cleared its arrears to the IMF in 2016.

However, despite these efforts, Zimbabwe remains unable to access new loans from international financial institutions until all outstanding arrears are cleared.

Progress has been limited, and the debt crisis remains unresolved.