Zimbabwe Faces More Pressure From Reforms, AfDB Chief Says

(Bloomberg) -- Zimbabwe faces “even greater pressure” on its stretched finances from the weight of reforms it’s implementing to try and unlock a revamp of $21 billion debt it owes international creditors, African Development Bank President Akinwumi Adesina said.

As of December 2023, the Reserve Bank of Zimbabwe had transferred $3.66 billion of external debt to the Treasury, Adesina told a debt conference Monday in Harare, the capital.

The new liability “has put even greater pressure on the government’s fiscal space by increasing debt repayments from the national budget in the face of a weakened currency,” he said, according to a transcript of his comments on the AfDB’s website.

Earlier this month, the Treasury announced spending cuts following the 43% devaluation of the local currency against the dollar in late September, citing a “substantial mismatch” between revenue and spending.

The southern African nation appointed Adesina and former Mozambique leader Joaquim Chissano in 2022 as the chief negotiators to revamp its debt that has kept it locked out of international capital markets since 1999. Zimbabwe counts the World Bank, Paris Club, European Investment Bank and the AfDB among its list of creditors. It also recently hired Global Sovereign Advisory and Kepler-Karst to assist.

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The International Monetary Fund in June advised the central bank to halt all quasi-fiscal activities and transfer debt to the Treasury as part of recommendations to help support its new local currency, the ZiG.

Zimbabwe has delivered “impressive reforms” and Adesina said he is working toward a debt deal before his tenure ends next August. The economic reforms rolled out include ending multiple exchange rates, eliminating the “Dutch” foreign-exchange auction window, and setting up an inter-market currency system based on willing-buyer, willing-seller principles, he said.

IMF teams have visited Zimbabwe four times, Adesina said.

“They expect to have the next mission in January to prepare the framework for the staff-monitored program,” he said. “This will be a significant milestone toward concretizing the arrears clearance and debt resolution.”