Treasury in US$2.5bn bailout bid

STAFF WRITERS

Zimbabwe is seeking a US$2.5bn bailout, as Treasury races to clear long-standing debt arrears to the World Bank, African Development Bank and a range of bilateral creditors including Paris Club and non-Paris Club creditors, a move aimed at extricating the country from its more than two decades of financial isolation, and restore access to global capital markets, Business Times can report.

Speaking from the corridors of the IMF/World Bank Spring Meetings in Washington DC yesterday, Finance, Economic Development and Investment Promotion Minister Mthuli Ncube said Treasury is intensifying negotiations with the United Kingdom, Germany, France and Algeria, among many others to mobilise bridge financing that would allow Harare to settle its arrears and regain access to global capital markets.

Ncube revealed that authorities are now actively seeking “champions” to underwrite the clearance plan, a decisive step that could reset Zimbabwe’s credit standing and reopen long-shut international funding channels.

“We are at a stage where we are engaging potential champions to help us clear the debt arrears,” Ncube said. “We need strong partners who can support us with funding to clear obligations to the World Bank and the AfDB. We are making excellent progress.”

Zimbabwe’s total public debt has climbed to approximately US$23.4bn, of which US$7.7 bn is in arrears. External debt stands at US$13.6bn, owed largely to multilateral and bilateral creditors, while domestic debt accounts for US$9.8bn. These arrears date back to the early 2000s, when economic collapse and political fallout triggered widespread defaults, shutting Zimbabwe out of international financial systems.

The cost of that isolation has been immense. For over 20 years, Zimbabwe has been locked out of concessional financing, limiting its ability to fund infrastructure, attract foreign direct investment, and cushion the economy against shocks. This has entrenched cycles of inflation, currency instability and weak growth, leaving both government and the private sector starved of long-term capital.

The proposed bailout hinges on securing bridge financing, a temporary but critical funding mechanism that would allow Zimbabwe to clear arrears with multilateral lenders.

Once these obligations are settled, the country would regain eligibility for concessional loans and development support, effectively reopening the taps of international finance.

Momentum behind the process has been building, with the African Development Bank, under the stewardship of its former president Akinwumi Adesina, playing a pivotal role in facilitating dialogue between Zimbabwe, its creditors and international partners.

This coordinated approach has helped restore a measure of confidence in Harare’s willingness to address its debt crisis.

However, authorities are also preparing for less favourable outcomes.

Professor Ncube revealed that government has crafted alternative strategies should negotiations falter. One such route involves securitising national assets or pursuing structured asset sales to raise funds from the market, effectively turning to commercial channels to plug the financing gap.

Another pathway rests on improving macroeconomic fundamentals, with Zimbabwe’s debt-to-GDP ratio currently estimated at around 45 percent and expected to decline as economic growth gathers pace.

The bailout effort is inseparable from a broader reform agenda that Zimbabwe must pursue to rebuild trust with international lenders.

Authorities are under pressure to strengthen public financial management, improve governance standards, stabilise the currency and enforce fiscal discipline. These reforms are widely seen as essential not only for unlocking funding, but also for ensuring that any future financial support translates into sustainable economic recovery.

Years of constrained fiscal space have also left critical sectors such as health and education underfunded, while infrastructure has deteriorated and social safety nets remain thin.

For businesses, particularly small and medium enterprises, limited access to affordable capital continues to stifle expansion and job creation, deepening economic vulnerability.

Zimbabwe’s exclusion from global capital markets has also meant that when it does borrow, it pays a steep premium, reflecting heightened risk perceptions tied to its debt distress, policy uncertainty and currency volatility.

This has further compounded the country’s fiscal challenges, creating a vicious cycle that the current bailout effort seeks to break.