Zim debt, a crisis that demands real solutions

Zimbabwe’s public debt crisis has reached a tipping point.

With debt soaring past US$21bn—equivalent to nearly 90% of GDP—the government is scrambling for solutions, including selling off State-owned Enterprises (SOEs).

 While this move might offer temporary relief, it fails to address the deeper structural issues driving Zimbabwe’s unsustainable debt trajectory.

Without bold fiscal reforms, economic diversification, and sound public finance management, the country risks deeper financial turmoil, further isolation from global credit markets, and prolonged economic instability.

Zimbabwe’s debt crisis did not happen overnight. Years of excessive borrowing, poor fiscal management, and a failure to service existing obligations have created a vicious cycle where the country is perpetually trying to outrun its financial obligations.

The government has relied on various debt restructuring strategies—including the Domestic Debt Restructuring policy (2001-2008), the Sustainable and Holistic Debt Strategy (2010), and the Lima Strategy (2015)—yet none have provided lasting relief.

Part of the problem is the mismatch between economic growth and debt servicing costs.

As Finance Minister Professor Mthuli Ncube pointed out, Zimbabwe’s economic growth rate of around 6% is well below the interest rates on its debt. This means that debt accumulation will continue outpacing the country’s ability to repay, worsening fiscal instability.

Meanwhile, continued borrowing—especially from China and other non-traditional lenders—without a clear repayment strategy risks deepening the crisis.

Zimbabwe’s inability to access credit from international financial institutions due to unpaid arrears has further constrained its options, leaving the country vulnerable to unfavorable loan conditions.

In response to the crisis, the government is now turning to asset sales. While selling off SOEs might provide short-term liquidity, it is not a sustainable solution.

 In the absence of a broader economic recovery plan, this strategy risks asset depletion without addressing the root causes of the debt problem.

Zimbabwe’s experience with privatization has been mixed.

Many state enterprises, despite inefficiencies, play crucial roles in national development. Rushed or poorly managed sales could result in the loss of key public assets, increased unemployment, and weakened government control over essential services.

Worse still, if proceeds from asset sales are merely used to pay off existing debt—without reinvesting in productive sectors—the country will find itself back in the same financial predicament within a few years.

Solving Zimbabwe’s debt crisis requires more than quick-fix measures.

The government must take a long-term, strategic approach to ensure fiscal sustainability and restore economic confidence.

This includes:

*Fiscal Discipline and Transparency: A sustainable debt management framework must be rooted in accountability. The government must commit to transparent borrowing, disclose all liabilities, and ensure that new debt is acquired under terms that benefit economic growth rather than deepen the crisis.

*Economic Diversification: Overreliance on minerals and external debt is a dangerous strategy. Zimbabwe must invest in manufacturing, agriculture, tourism, and technology to create multiple revenue streams and reduce dependency on unsustainable borrowing.

*Institutional and Governance Reforms: Corruption and governance failures have contributed significantly to Zimbabwe’s debt woes. Strengthening institutions, promoting transparency, and enforcing fiscal responsibility are critical to restoring investor confidence and unlocking international financial support.

*International Debt Engagement: Debt relief or restructuring may be necessary, but Zimbabwe must demonstrate commitment to economic and governance reforms. Constructive engagement with creditors—including the World Bank, African Development Bank, and Paris Club members—is crucial to regaining credibility in global markets.

*Domestic resource mobilization: The government must maximize revenue generation through tax reforms, reducing illicit financial flows, and improving efficiency in public expenditure. Strengthening local industries and fostering private-sector growth will also be key to achieving economic self-sufficiency.

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