Locked out of debt markets, Zimbabwe will borrow locally to fund budget deficit

Finance Ministry Permanent Secretary George Guvamatanga

Zimbabwe plans to fund the bulk of its budget deficit from domestic sources until 2025 as it continues to be locked out of international debt markets, the Finance Ministry said in a policy document.

“Debt distress, and the accumulation of external debt arrears has worsened the country’s inability to access funding from external traditional sources and the international financial and capital markets,” George Guvamatanga, secretary for finance, said in the Medium-Term Debt Strategy paper.

According to the International Monetary Fund’s debt sustainability analysis, the southern African nation is “in debt distress, with unsustainable public and publicly guaranteed external and total debt and large external arrears.”

Total public debt stood at s US$17.2 billion end-December and external debt arrears and penalties were estimated at US$6.6 billion.

To fund the fiscal shortfall, which is forecast to remain below 3% of gross domestic product over the next three years, and infrastructure projects, 90% of financing will be raised locally through the issuance of medium- to long-term debt securities as well as bonds on the Victoria Falls Securities Exchange, Guvamatanga said. The rest will come from external debt sources, such as the OPEC Fund for International Development and sovereign bonds.

Zimbabwe resumed token payments to creditors, including the Paris Club, and international finance institutions last year to reopen access to those credit lines after it defaulted on payments to the World Bank, the IMF and other multilateral lenders more than two decades ago.