Fierce pushback as Zim debt riots into dangerous territory

A fierce critic of how Zimbabwe has handled its US$23 billion debt burden this week tore into the credibility and inclusivity of Harare’s heavily-publicised reform agenda, as the African Development Bank (AfDB) said it would inject US$4 million to support ongoing arrears clearance processes.

The Zimbabwe Coalition on Debt and Development (Zimcodd) warned that the country’s worsening debt profile was pushing it deeper into dangerous territory, as it called for urgent action.

This week’s red flags emerged amid repeated government assurances that recovery efforts are gaining traction.

Zimcodd’s concerns were triggered by reports in this newspaper last week that a regional survey had grouped Zimbabwe among Africa’s most debt-distressed economies.

The report was jointly prepared by the United Nations Development Programme, the African Union, the Economic Commission for Africa and the AfDB.

In its sharp rebuke, Zimcodd queried why Zimbabwe continued sliding deeper into fiscal distress if reforms being championed by authorities were producing results.

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The debt campaigner said Zimbabwe’s deteriorating position would likely unsettle investors already wary of policy inconsistency, governance concerns and unresolved arrears that have kept the country locked out of international capital markets for more than two decades.

“This classification signals the urgent need for people-centred reforms anchored on accountability, fiscal discipline and sustainable economic transformation,” Zimcodd said in response to questions from the Zimbabwe Independent.

“The central concern is whether Zimbabwe’s growing debt burden is financing productive sectors that generate broad-based economic growth and social development, or whether the country is accumulating liabilities that future generations will ultimately bear.

“Public debt estimated at around US$23 billion, coupled with increasing private-sector borrowing backed by sovereign guarantees, raises concerns about intergenerational debt injustice,” the campaigner warned.

“In a context where citizens already face deteriorating public services, unemployment and high living costs, borrowing without sufficient transparency, accountability and economic returns risks deepening inequality and fiscal vulnerability rather than building sustainable productive capacity.”

Zimbabwe’s debt crisis remains one of the biggest obstacles to economic recovery after years of instability that climaxed in 2008 when hyperinflation exploded to an unprecedented 500 billion percent, according to the International Monetary Fund.

The economy later swung into deflation in 2009, with inflation dropping to -7,7%, before entering another prolonged cycle of currency and price instability.

Debt management has been on the agenda of President Emmerson Mnangagwa’s administration after he came to power in 2017.

“Zimbabwe’s classification alongside some of Africa’s most distressed economies raises serious questions about the credibility, consistency and inclusivity of the country’s economic reform agenda,” Zimcodd said.

“While government has repeatedly announced reform measures, investors and citizens alike assess reforms based on tangible improvements in economic governance, currency stability, transparency and institutional accountability.

“Persistent debt distress, policy inconsistencies and limited progress on arrears clearance continue to undermine confidence in Zimbabwe’s economic recovery prospects,” it added.

The organisation also warned that government guarantees attached to private infrastructure and investment projects could create hidden fiscal liabilities that may eventually fall on taxpayers.

“Government guarantees on private infrastructure and investment projects create significant contingent liabilities that may not immediately appear in public debt statistics but can eventually become obligations for taxpayers if projects fail or underperform,” the campaigner warned.

“In the absence of strong parliamentary oversight, transparent procurement systems and public disclosure mechanisms, these guarantees may expose the country to hidden fiscal risks.

“Zimbabwe must therefore ensure that all publicly-guaranteed projects are subjected to rigorous cost-benefit analysis, public accountability and sustainability assessments to avoid a renewed cycle of debt distress and potential defaults,” it added.

Just over a year ago, Mnangagwa enlisted former AfDB president Akinwumi Adesina and former Mozambican president Joaquim Chissano to lead Zimbabwe’s arrears clearance and debt resolution process amid mounting calls for governance reforms as part of the country’s re-engagement agenda.

However, that process has increasingly been overshadowed by developments critics say undermine confidence in the reform programme, including the controversial Private Voluntary Organisations (PVO) Act, which drew criticism from Western diplomats and governance watchdogs.

This week, the AfDB approved a US$4 million grant to support Zimbabwe’s arrears clearance and international re-engagement efforts.

“The funding will finance the Zimbabwe Arrears Clearance Dialogue Enhancement Project (ZACDEP), aimed at strengthening dialogue and reforms needed to advance the country’s arrears clearance process,”

the lender said.

“This burden of arrears has severely constrained the country’s access to external financing and limited public investment. This burden of arrears has severely constrained the country’s access to external financing and limited public investment.

“The grant builds on the Support for Arrears Clearance and Governance Enhancement (SACAGE) project approved in 2022. SACAGE established the Structured Dialogue Platform and Sector Working Groups, bringing together the Government of Zimbabwe, creditors, development partners, civil society organisations and the private sector to sustain dialogue on reforms and debt resolution.”

The approval follows the IMF’s Staff-Monitored Programme approved in April, regarded as a key step towards broader debt resolution.

It also reflects progress in macro-economic stabilisation under reforms anchored in the second phase of Zimbabwe’s National Development Strategy.

Commenting on the approval, AfDB country manager for Zimbabwe Eyerusalem Fasika said: “This approval reaffirms the African Development Bank’s strong commitment to supporting Zimbabwe’s economic resilience. “Clearing arrears is the gateway to unlocking the development financing the country urgently needs.”

The report by the four influential agencies lays bare the scale of Zimbabwe’s long-running fiscal crisis and the mounting risks linked to rising debt burdens across African economies.

The US$23 billion debt is roughly equivalent to nearly half of gross domestic product estimated at around US$50 billion. However, analysts say the effective burden is significantly heavier once contingent liabilities, state guarantees, legacy arrears and quasi-fiscal obligations are factored in.

The debt overhang has increasingly alarmed international financial institutions, particularly as Zimbabwe remains shut out of concessional global capital markets because of unresolved arrears owed to the World Bank, AfDB and other multilateral lenders.

In the report by the four agencies titled The Impacts of the Middle East Conflict on African Economies, Zimbabwe was grouped alongside Congo Republic, Djibouti, Ethiopia, Malawi, Sao Tome and Principe, and Sudan — countries grappling with severe fiscal instability, debt restructuring crises, foreign currency shortages or conflict-induced economic collapse.

Analysts say Zimbabwe’s debt profile has also shifted increasingly towards private sector-linked obligations, many carrying shorter repayment periods and significantly higher risk exposure.

Zimcodd said while authorities continued insisting Zimbabwe’s debt remained manageable, investors and citizens should focus on broader indicators reflecting the economy’s true fiscal health.

These include debt-servicing capacity, debt-to-GDP ratios, inflation levels, exchange rate stability, fiscal deficits, foreign currency reserves and the extent of public spending on social services such as health, education and social protection.

“Equally important is the level of transparency in public borrowing, the publication of debt data and the extent to which citizens are meaningfully involved in debt governance processes,” Zimcodd said.

“Sustainable debt management should ultimately translate into improved livelihoods, stronger public institutions and inclusive economic development.”

The Zimbabwe Investment and Development Agency said in its first quarter report that foreign currency-denominated debt financing surged to a record US$431,37 million during the period — almost double the previous peak recorded in the final quarter of 2025.

The sharp increase reflects growing reliance on debt-funded investment as companies scramble for capital in a market where long-term equity financing remains limited.

“Debt financing reached its highest level in Q1 2026 at US$431,37 million, nearly double the peak recorded in Q4 2025,” Zida said.

“This indicates an increasing reliance on leveraged financing, possibly reflecting improved confidence in the financial system’s capacity to support loan servicing and repayment.”

While authorities and some analysts interpret the figures as evidence of improving confidence in the financial sector, others argue the trend exposes deep structural weaknesses in Zimbabwe’s financing architecture.

Africa Economic Development Strategies executive director Gift Mugano said the increase in borrowing reflected stronger liquidity conditions and expanding productive sector activity.

Zimbabwe National Chamber of Commerce chief executive officer Christopher Mugaga recently warned that growing sovereign guarantees attached to private infrastructure projects could further destabilise already fragile public finances.

Independent economist Vince Musewe said Zimbabwe’s poor repayment history continued to undermine confidence in government guarantees.

The concerns come as African economies face mounting debt pressures following years of aggressive post-pandemic borrowing, climate shocks, global inflation, rising interest rates and weakening commodity prices.

The continent’s debt crisis has deepened sharply over the past five years, widening the divide between economies already in distress and those considered highly vulnerable.

Sudan remains Africa’s most indebted economy, with debt estimated at above 250% of GDP amid prolonged conflict, sanctions and economic collapse.