Treasury to sell off State assets

… as mounting debt surpasses 90% of GDP

LIVINGSTONE MARUFU

Treasury is racing against time to identify and dispose of several State-owned Enterprises (SOEs) in a desperate attempt to settle its spiraling public debt, which has soared past US$21bn.

The staggering debt mountain, amounting to nearly 90% of the country’s Gross Domestic Product (GDP),is threatening to choke economic progress and erode any remaining fiscal stability.

The move reflects mounting desperation within the Treasury, which faces the daunting challenge of satisfying international creditors while navigating a constrained economy.

Key lenders include the World Bank, African Development Bank (AfDB) and members of both the Paris and non-Paris Clubs.

Zimbabwe’s public debt has become an unrelenting obstacle to economic recovery, forcing the Ex-Chequer to consider liquidating State assets.

The debt, fuelled by years of borrowing and compounded by interest, now dwarfs the country’s economic growth rate, creating a perpetual cycle of fiscal instability.

Speaking to Business Times, a market leader in business, finance and economic reportage, on the sidelines of the launch of the National Venture Capital Company of Zimbabwe (NVCCZ) event, held in the capital last week, the Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube, acknowledged the severity of the crisis and confirmed that Treasury has commenced a sweeping process of identifying assets to dispose.

 “We are looking to see which assets we should target. It’s a work in progress. When opportunities arise,  we will swing on the right assets and we’ll be able to allow ourselves to dispose them,” Professor Ncube said.

He added: “What is more worrisome to me is that Zimbabwe’s average growth of around 6% is way lower than the interest rates growth.

This means that our debt will continue to be increasing. That’s why we have to restructure our debt to ensure that the debt does not accumulate.”

Faced with limited repayment capacity and growing international isolation, the government is eyeing the liquidation of State assets as a potential lifeline.

Zimbabwe’s public debt trajectory has drawn concern from economists and financial analysts alike. With average economic growth hovering around 6%—far below the interest rate growth on its debt—Zimbabwe finds itself in a precarious position where the debt stock continues to balloon.

Last year, the Government launched high-level dialogue platforms led by AfDB President Dr. Akinwumi Adesina and former Mozambican President Joaquim Chissano.

However, delays in implementing key governance reforms, which are crucial to the arrears clearance and debt resolution agenda, have stymied progress.

Economist Professor Gift Mugano warned that the country’s debt levels, coupled with its limited repayment capacity, could trigger a full-blown fiscal crisis if not addressed urgently.

“The government’s slow pace in addressing governance reforms risks further isolating Zimbabwe from international financial support,” Professor Mugano said.

“The rising debt levels demand immediate restructuring or forgiveness to avoid economic catastrophe.”

Professor  Ncube appealed to stakeholders across sectors—including the private sector, civil society, and development partners—to view the debt crisis as a shared national challenge rather than a government issue.

“This is a collective problem,” Professor Ncube said.

“We need all hands on deck to tackle it, as it affects every facet of our economy and society.”

Analysts echoed these sentiments, emphasizing that bold and decisive reforms are essential to resolve the crisis. Without structural changes, Zimbabwe risks deepening its economic woes, with long-term consequences for its already fragile economy.

In an attempt to address the debt problem in Zimbabwe, the government undertook a number of initiatives. Between 2001 and 2008, it undertook the Domestic Debt Restructuring policy.

It, however, did not produce intended results due to the poor performance of the economy.

The other was the Sustainable and Holistic Debt Strategy of 2010.

No debt was, however, paid following the intervention. Government also formulated the Zimbabwe Accelerated Arrears Clearance Debt and Development Strategy in considering a debt relief mechanism under the Heavily Indebted Poor Countries (HIPC) initiative and make use of fresh financing from international institutions and mineral wealth to achieve sustainable development.

There was also the Lima Strategy of October 2015, yet another attempt Zimbabwe made to clearing debt arrears.

It was premised on a non-HIPC debt resolution strategy designed to clear debt arrears amounting to US$1.8bn owed to IMF, World Bank Group and the African Development Bank as the first step towards seeking a debt treatment by the Paris Club after which the government would commence negotiations towards a resolution with the Paris Club.

Zimbabwe cleared its overdue obligation to the International Monetary Fund (IMF) in October 2016.

However, the country cannot acquire new debt from the international financial institutions and other creditors until they clear all the arrears they owe to creditors.

Despite all these strategies there has been limited success achieved in addressing Zimbabwe’s debt problem.

The performance of a sustainable debt management framework is hinged on sound public finance management.

However, even without a sound debt management framework in place, Zimbabwe has continued to contract new loans from China.

This threatens the repeat of past mistakes of over-reliance on foreign borrowing rather than using domestic resources and using foreign borrowing for activities which will not create sufficient returns to repay the loans.

As part of a sustainable and inclusive debt management approach, they argued, the government should simultaneously undertake strong macroeconomic policies and structural measures.

Zimbabwe is one of the seven countries that are in debt distress. Other countries in debt distress are Eritrea, Gambia, Mozambique, Republic of Congo, Sao Tome and Principe and South Sudan.

For the past 25 years, Zimbabwe has neglected to service its debts.

This has constrained the government from accessing foreign loans except from a few creditors because there are no guarantees.

Failure to clear arrears has affected Zimbabwe’s credit ratings, making it a pariah in international capital markets.

Even though Zimbabwe paid off its arrears with the International Monetary Fund in 2016, it still owes other international financial institutions such as the World Bank and the African Development Bank, the African Development Bank, hampering its ability to tap into development financing from the institutions.

According to the ministry, the Government is committed to implementing a transparent and collaborative process.

Implementation of the process is being spearheaded by Sector Working Groups (SWGs) tasked with centring discussions on the Government’s implementation of reforms under three key strategic pillars.

These are Economic Growth and Stability Reforms, Governance and Land Tenure, Compensation of Former Farm Owners and Resolution of Bilateral Investment Protection and Promotion Agreements (BIPPAs).

Zimbabwe’s debt crisis is not just a fiscal challenge but a broader economic threat. Analysts warn that failing to address the problem could lead to diminished investor confidence, reduced access to capital markets, and further economic isolation.

As Zimbabwe grapples with its debt crisis, the government’s desperate attempt to sell off state assets underscores the gravity of the situation. With public debt surpassing US$21bn and the country’s debt-to-GDP ratio nearing unsustainable levels, urgent action is imperative.

The path forward will require bold reforms, international cooperation, and national unity.

Zimbabwe stands at a critical juncture: decisive action today could pave the way for economic recovery, while continued delays risk plunging the country into deeper financial turmoil.

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