ZIMBABWE’S total public and publicly-guaranteed debt was reported at US$21,5 billion in March 2025. This debt comprises foreign debt, which accounts for the bigger percentage, and domestic debt.
Already, some of this debt has gone for years without repayment. Debt in arrears includes what is owed to the World Bank and the Paris Club (a group of 22 mostly advanced economies), among others.
These arrears make Zimbabwe a higher default risk compared to countries that remain up-to-date with their debt repayments.
In essence, these challenges make it harder for the Zimbabwean government to access credit easily, both domestically and internationally.
Additionally, borrowing at low interest rates, usually enjoyed by more creditworthy countries such as South Africa, Singapore and Korea, becomes extremely difficult.
With higher interest rates, whatever borrowings the state mobilises will need to be managed prudently, in an effort to produce returns higher than the borrowing cost for them to remain sustainable.
Failure to achieve such high returns on public investments means Zimbabwe risks being trapped in both a debt and national economic crisis.
When a government maintains sustainable debt levels, it creates fiscal space to intervene positively in the economy during future crises.
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Bulls to charge into Zimbabwe gold stocks
- Ndiraya concerned as goals dry up
- Letters: How solar power is transforming African farms
Keep Reading
In essence, a culture of low or sustainable public debt allows a government to borrow a little more than usual during times of economic hardship.
It can then use those borrowings for social spending or public investment to help revive the economy from its slump.
The Covid-19-induced economic crash of 2020 is a good example of such a crisis, which required extraordinary government expenditure to keep economies afloat.
A sudden fall in the prices of major commodity exports such as platinum, lithium or diamonds; widespread droughts; or damage caused by incessant rainfall are other examples of national-level crises that may require comprehensive government intervention.
The foregoing implies that if a government has been borrowing unsustainably all along, it will face difficulties during such crises.
This is because it will have limited capacity for further borrowing, whether domestically or on international markets. Without such borrowing capacity, extra government expenditure, as a tool for stabilising a vulnerable economy, cannot be mobilised. That is why fiscal rules are critical, as they help to create this essential state capacity.
Moreover, by ensuring that government debt remains sustainable, fiscal rules also achieve anti-inflationary and growth-supporting outcomes. Fiscal rules are policies and laws that impose desirable constraints on government spending and borrowing.
In a way, they are rules that guide how a country uses its tax revenues, with the ultimate goal of minimising the need for public debt.
They are enforced by setting limits on metrics such as the national budget deficit or the level of debt as a percentage of GDP (debt-to-GDP ratio). In some cases, fiscal rules are incorporated into a country’s Constitution and thus become law.
In other cases, they are handled as policy, broad principles that guide government decisions but are not legally enforceable.
The International Monetary Fund (IMF) reports that, on paper, more than 120 countries globally have adopted fiscal rules.
However, in practice, not all of them adhere to their own rules, continuing to borrow unsustainably despite their stated commitment to fiscal discipline.
Fiscal rules in Zimbabwe
In Zimbabwe, various fiscal rules exist, some of which are backed by the Constitution. However, implementation is not comprehensive and sometimes they are ignored altogether.
Section 300 (1) of the Constitution
This section requires an Act of Parliament to set limits on state borrowings, prescribed not to exceed 70% of GDP. That means the country’s laws stipulate that public debt must remain below a 70% debt-to-GDP ratio.
Exceptions are provided for in cases of natural disaster, when borrowing to establish critical public investments, or during a period of marked economic slowdown.
Some downsides exist with using the debt-to-GDP ratio as a fiscal rule, including the fact that it does not consider prevailing interest rates at which the government can borrow.
For instance, if the government can access concessional loans at low interest rates (say, 2% per annum), it may be reasonable or even advantageous to take up such debt to stimulate the economy and increase repayment capacity through high-return investments.
That means if the government borrows at concessional rates, it can actually be better off even if it breaches the stipulated debt-to-GDP ratio. To address this, an escape clause could be created in the Constitution to permit borrowing at concessional rates even if it results in a temporary breach of the ratio.
Debts, obligations
This includes debt contracted by state-owned institutions, usually guaranteed by the State. Section 300 (2) of the Constitution requires an Act of Parliament to lay out the terms and conditions under which the government may guarantee loans.
Sections 300 (3) and 300 (5) further require the minister of Finance to publish the terms (interest, repayment period, intended use, etc.) of the country’s loans within 60 days of acquisition and to present the current state of national debt before Parliament twice a year.
The Reserve Bank Act (Chapter 22:15) stipulates that government borrowings from the Reserve Bank of Zimbabwe (RBZ) should not exceed 20% of the previous year’s state revenues.
All these rules are meant to encourage sustainable management of state finances to promote economic stability and growth.
Unfortunately, Zimbabwe has often ignored its own fiscal rules.
For example, in 2018, the government’s overdraft with the RBZ stood at US$2,93 billion, representing 75,6% of 2017 state revenues, clearly violating the Reserve Bank Act.
Moreover, on several occasions, the minister of Finance has failed to present before Parliament the required records of loans and debt guarantees.
Several domestic institutions are mandated to ensure that national debt remains sustainable and consistent with the Constitution.
These include the Parliament of Zimbabwe, the ministry of Finance, Economic Development and Investment Promotion, the Reserve Bank of Zimbabwe, the External and Domestic Debt Management Committee and the Debt Management Office (DMO).
Interestingly, the DMO is housed within the ministry of Finance, Economic Development and Investment Promotion. The Public Debt Management Act mandates the DMO to conduct annual debt sustainability analyses and the ministry is required to take its advice.
However, a potential conflict of interest arises since the ministry also oversees the DMO’s activities. This may limit the DMO’s independence if its advice conflicts with the ministry’s objectives.
High staff turnover at the DMO has been reported and is linked to its inability to offer competitive remuneration. Limited information sharing between the RBZ and the ministry of Finance on public debt data has also been observed.
The External and Domestic Debt Management Committee reportedly meets irregularly, despite its mandate to provide up-to-date advice to the minister on debt sustainability.
The committee comprises the permanent secretary in the ministry of Finance, the RBZ governor, the Attorney-General and other technical experts appointed by the chair (the finance permanent secretary).
The government’s continued borrowing without parliamentary approval also reflects the weak oversight capacity of Parliament, as provided for in the Constitution.
Other fiscal anchors to consider
Beyond the existing framework, Zimbabwe should consider adopting additional fiscal anchors (rules) such as those highlighted below. These are clear and easy to enforce, enhancing accountability.
The government could use the balance of its annual national budget as a fiscal anchor. For instance, a rule could stipulate that the national budget must balance or show a surplus (not a deficit) at all times, unless specific crises justify a breach.
This approach helps when the government faces runaway debt that must be repaid from regular revenues rather than through new borrowing. In such cases, non-priority expenditure should be frozen to prevent undue pressure on fiscal resources.
However, this anchor has challenges. It can make government spending erratic, rising sharply during economic booms when revenues are high and contracting during slowdowns. This pro-cyclical spending pattern can amplify both expansions and recessions.
To mitigate this, the government can commit to creating financial savings during strong growth periods, which can then be used during downturns without creating budget imbalances through borrowing.
Another possible anchor focuses on net interest expense on government debt, limiting annual interest payments as a percentage of government revenues or GDP.
This helps keep interest expenses within reasonable limits, preventing debt from becoming unsustainable. However, interest expenses are a lagging indicator, reflecting costs on past borrowings rather than future risks or opportunities.
A sudden increase in interest rates can make this anchor risky, requiring drastic budget cuts to reduce debt service. Since some public debt carries variable interest rates, sharp expenditure adjustments could destabilise both social and economic conditions.
Conclusion
In Zimbabwe’s case, adherence to existing fiscal rules needs to be strengthened. Stronger enforcement would compel government to find innovative ways of raising revenue beyond borrowing.
For example, a favourable domestic investment climate can attract both local and foreign investors, driving economic growth and boosting tax revenues. Similarly, formalising more of the economy can achieve the same outcome.
Promoting export growth would also generate positive results for both government revenues and overall economic stability.
- Tutani is a political economy analyst. — [email protected].
