Source: Zim to leverage natural resources for debt clearance – herald
Nqobile Bhebhe
Zimpapers Business Hub
The Government is considering leveraging its natural resource endowment to service external debt obligations, while continuing with the traditional route of negotiating with bilateral creditors for bridging loans, according to the Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube.
Speaking on the sidelines of the Zimbabwe Economic Development Conference in Bulawayo last week, Professor Ncube said the Government had already put in place one structure anchored on platinum resources, which is being used to service part of the country’s external debt.
Zimbabwe is endowed with abundant critical minerals that are in high demand for the global energy transition, including lithium, platinum group metals, manganese, cobalt, copper, chromium, nickel and rare earth elements.
Professor Ncube said the resource-backed approach, carefully structured around specific projects, would complement traditional financing options, ensuring the nations strengthens its position in international debt negotiations.
“We are pleased that the new president of the African Development Bank, President Dr Sidi Ould Tah, has also committed himself to supporting Zimbabwe in its arrears clearance agenda,” he said. “This is very pleasing indeed. But when it comes to strategies for paying off, we are certainly considering natural resources. There are certain structures that we will put in place. In fact, we already have one structure involving platinum already in place, which we have been utilising as a way to service some of the external debt.
“I cannot give you details. So we will expand those structures so that we can fully leverage our natural resources to deal with some of the debt. But the idea really is to structure these around specific projects, around your project finance arrangement. That’s the best way. We will be able to say more as we go forward.”
The country is at a pivotal moment in its economic journey, with the Second Republic working to clear its US$21 billion obligations.
This debt, which includes US$12,3 billion in external obligations, has posed significant challenges to the country’s economic growth and development. Consequently, the Second Republic initiated the high-level arrears clearance and debt resolution platform.
However, Professor Ncube stressed that the traditional path of engaging bilateral creditors remained central to Zimbabwe’s arrears clearance strategy.
“That does not mean that we are not also focusing on the normal, traditional route, which is that you speak to bilateral creditors, you get a sponsor, then they help you provide a bridging loan, which you then clear with the AfDB or World Bank. That is still in play and we are still pursuing that, so that won’t stop,” he said.
Professor Ncube also noted that Zimbabwe’s debt sustainability indicators had improved significantly, largely driven by robust GDP growth projections.
“One silver lining though is that our debt-to-GDP ratio has dropped because the denominator of GDP size is bigger,” he said. “As we speak, by year-end now with our growth rate being upgraded to 6,6 percent, our GDP is upwards of US$52 billion.
“So our debt-to-GDP ratio is almost at 44 percent by year-end. It puts us in a very good position while we are negotiating, to say we are making progress and we are no longer seen to be a highly indebted country. We may have liquidity challenges, but we are not a highly indebted country. All this is boding well for us.”
The dual strategy of leveraging natural resources while engaging multilateral and bilateral creditors is seen as a pragmatic approach to addressing Zimbabwe’s debt overhang, which has constrained access to concessional financing for decades.
Secretary for Finance, Economic Development and Investment Promotion Mr George Guvamatanga weighed in, saying the country needs to restructure its debt as the issue is not a debt distress problem but one of liquidity constraints.
“The issue really is that most of the debt is now overdue and because it’s overdue, it is payable now. So the liquidity to pay now is not available. So the issue is not a debt distress problem. The issue is a liquidity problem. What needs to be done is the restructuring of the debt.”
He added, “But the issue of debt distress has been dealt with; the issue is now getting the liquidity to repay the debt and restructuring the debt so that maybe we spread it over another five to ten years, then we will definitely deal with the issue of debt.”
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