US$1.7bn hidden debt sparks Treasury crackdown

LIVINGSTONE MARUFU

Treasury is set to launch an unprecedented audit of government arrears after uncovering US$1.7bn in unvalidated expenditure, a revelation that senior officials privately concede has rattled confidence in the state’s financial controls and deepened concerns over governance failures at the heart of the public sector.

The move, disclosed by Finance Minister Professor Mthuli Ncube, follows his admission that weak structural systems in public procurement and over-contracting have “constrained the country’s fiscal space,” leaving the State dangerously exposed to liquidity pressures, rising debt vulnerabilities and mounting reputational risks.

The arrears pile-up—some of which Treasury fears may relate to services procured without due process—has emerged as one of the starkest indicators of how fragile Zimbabwe’s public finance management (PFM) systems have become. The State’s inability to track, verify or settle obligations on time has disrupted service delivery, strained private contractors, undermined banking sector confidence and cast fresh doubt over the credibility of the national budget.

Professor Ncube said Treasury will now embark on a “comprehensive audit process to verify the arrears”, supported by a rule-based clearance strategy running from 2026 to 2030. Under the plan, validated arrears will be settled gradually through annual budget allocations tied to a fixed share of government revenues. “This approach enhances predictability and aligns repayment efforts with fiscal capacity, taking into account limited fiscal space,” he said.

The minister signalled a decisive end to off-budget spending, long a hallmark of Zimbabwe’s opaque procurement culture. Treasury, he said, would strictly enforce all provisions of the Constitution, the Public Financial Management Act, Statutory Instruments and Treasury Circulars to prevent the build-up of fresh arrears.

In a rare and candid admission of institutional decay, Treasury acknowledged that some commitments were never recorded in the Public Financial Management System (PFMS), as required under Section 17 of the 2019 PFM Regulations. Section 22, which mandates monthly reporting of arrears with full documentation, was similarly ignored across multiple ministries, departments and agencies (MDAs), further compounding oversight failures.

As part of sweeping corrective measures, Treasury has directed that all contracts above US$2 million must receive prior Treasury concurrence, while private contractors will be required to verify that concurrence was granted before supplying goods or services. Quarterly reporting of validated arrears will become mandatory, beginning with ministries holding the largest outstanding balances. Treasury will also pursue full PFMS integration, including USD payment modules, and ensure all MDAs transact exclusively through the PFMS.

To stabilise the system, the ministry plans to intensify its cash-flow forecasting, strengthen coordination between the budget office, debt management office and cash management unit, and roll out nationwide training on arrears prevention, PFMS utilisation and compliance enforcement.

The revelation of US$1.7bn in unverified arrears has triggered sharp criticism from economists. Professor Gift Mugano said: “The Government of Zimbabwe has reported a staggering US$1.7bn of unverified outstanding payments for the period 2022–2024 — this is a sign of poor governance and mismanagement.” Mugano questioned why Treasury did not disclose verified arrears for the same period and raised alarm over a US$900m jump in domestic debt between July and September 2025 alone.

Of the domestic debt stock, Treasury owes US$1.28bn to service providers, a burden Mugano said is “crippling the private sector” and threatening business survival as liquidity constraints tighten and contractors struggle to remain afloat.