Zimbabwe’s debt debate is increasingly being framed around one proposition: clear the country’s arrears to the multilateral development institutions, restore access to international finance and allow the economy to move forward.
By Brighton Musonza
That proposition sounds straightforward. Economically, however, it deserves much greater scrutiny.
The central question should not be whether Zimbabwe needs debt resolution. It clearly does. The question is whether a large upfront cash payment to selected multilateral creditors is the most efficient route to achieving it.
There is a profound difference between debt restructuring and debt repayment. Zimbabwe needs the former. It should be extremely cautious about turning the latter into the centrepiece of its economic strategy.
The country has spent more than two decades outside normal international capital markets. Its problem is not simply that it owes money. It is that its entire financial architecture has been disconnected from the global system of development finance.
Paying arrears without simultaneously restructuring the broader sovereign balance sheet risks solving the accounting problem while leaving the economic problem intact.
The “Peter to Pay Paul” Problem
The simplest way to understand the problem is through the old expression: you cannot borrow from Peter to pay Paul.
Zimbabwe is reportedly considering arrangements under which external financing could be mobilised to clear arrears to international financial institutions. The IMF’s current programme confirms that discussions over a potential bridge loan for clearing arrears to the World Bank, African Development Bank and European Investment Bank are underway. The Fund’s 2026 programme explicitly allows new external borrowing for this purpose.
But this raises a fundamental development-finance question.
If Zimbabwe borrows US$2.5 billion from one group of external creditors to pay another group within the same broad international financial architecture, the country has not fundamentally created new productive capacity. It has exchanged one liability for another.
That transaction could still make sense if it produces a sufficiently large reduction in future financing costs and unlocks much greater pools of capital. But that outcome cannot simply be assumed.
The question must therefore be: what precisely does every dollar of arrears clearance unlock, and at what economic cost?
Zimbabwe’s Arrears Are Not Ordinary Commercial Debt
Zimbabwe’s accumulated arrears are a product of a very unusual sovereign history.
The country has not serviced substantial portions of its external obligations for many years. The IMF estimates that official external arrears had reached about US$7.4 billion at the end of 2024, while the World Bank currently describes Zimbabwe’s external and overall public debt as unsustainable and in distress.
But an arrear that has remained unpaid for two decades should not be economically conceptualised in exactly the same way as a newly issued commercial bond.
The contractual claim remains important. Creditors do not simply erase sovereign claims because they have become old. Nor is it correct to assume that these obligations have simply been “written off” on creditors’ books.
The more important point is different: the economic value of an old sovereign claim is not necessarily equivalent to its historical face value.
That is precisely why restructuring negotiations exist.
Zimbabwe should therefore be negotiating around present value, repayment capacity, maturity, interest, creditor treatment and the economic value of restored market access.
The 49% Haircut Argument Needs Greater Precision
There is a popular argument that distressed sovereign borrowers can expect something close to a 49% reduction in their debt burden and that Zimbabwe could therefore reduce a US$12.5 billion obligation to roughly US$6.4 billion simply by entering a comprehensive restructuring.
That should not be presented as an established entitlement.
There is no universal rule under international debt architecture that automatically gives Zimbabwe a 49% haircut. The treatment of sovereign debt depends on creditor composition, the nature of each claim, the applicable restructuring framework, debt sustainability analysis, creditor negotiations and the principle of comparability of treatment.
Indeed, the IMF’s latest assessment says Zimbabwe is unlikely to qualify for the G20 Common Framework or HIPC Initiative because of its prolonged multilateral arrears and other eligibility considerations. It notes, however, that bilateral creditors could potentially provide relief or contributions as part of a comprehensive strategy under a Fund-supported programme.
That distinction is enormously important.
Zimbabwe should negotiate for maximum debt relief, but it should not build national economic policy around an assumed haircut that has not been negotiated.
The Real Objective Should Be Comprehensive Restructuring
The stronger economic argument is therefore not that Zimbabwe should refuse to deal with its creditors.
It is that Zimbabwe should resist treating isolated arrears payments as if they constitute debt restructuring. A genuine restructuring brings the relevant liabilities into a coherent framework.
Principal, accumulated interest, arrears, maturities, creditor priorities and future debt-service obligations must be assessed together.
The objective should be to establish a sovereign balance sheet that Zimbabwe can realistically service from its future tax revenues and foreign-exchange earnings.
The IMF itself recognises that successful debt resolution requires comprehensive debt reconciliation and clear restructuring parameters. Its 2026 programme says a sustainable strategy will require reconciliation of Zimbabwe’s debt and the establishment of clear debt-restructuring parameters.
That is the conversation Zimbabwe should be having.
Why Paying the Multilaterals Alone Is Not Enough
Zimbabwe’s arrears to multilateral institutions are important because they prevent access to conventional development finance.
The World Bank says its engagement in Zimbabwe remains limited because of arrears, although it continues providing technical assistance and financing through trust funds.
The African Development Bank has similarly positioned arrears clearance as a gateway to renewed engagement with international finance. In May 2026, it approved a US$4 million grant specifically to support Zimbabwe’s arrears-clearance process and re-engagement with the international financial community.
But this creates an important distinction.
Clearing multilateral arrears may reopen the door. It does not automatically guarantee that capital will walk through it.
Zimbabwe still has to demonstrate debt sustainability, credible fiscal management, monetary stability, institutional reform, governance credibility and the capacity to service new obligations.
The World Bank itself says Zimbabwe’s debt remains unsustainable and that structural reforms are necessary to unlock concessional funding and long-term investment.
The Infrastructure Paradox
The urgency of this debate becomes clearer when viewed through Zimbabwe’s infrastructure deficit.
The African Development Bank has estimated that Zimbabwe needs tens of billions of dollars in infrastructure investment over the coming decade. At the same time, the country remains constrained by its inability to access conventional long-term development finance.
The result is a peculiar financial arrangement.
Zimbabwe needs roads, railways, electricity, water infrastructure and digital networks. Yet because it cannot access cheap long-term capital, it increasingly has to mobilise more expensive domestic resources.
The Government’s proposed infrastructure financing model illustrates the problem.
Finance Minister Mthuli Ncube has been pursuing an infrastructure development fund that would mobilise financing against identifiable revenue streams rather than relying entirely on the national budget.
This is economically interesting because it points towards a more sophisticated model of project finance.
Instead of asking whether Government can borrow, the question becomes whether a specific infrastructure asset can generate sufficient predictable cash flow to support financing.
That is how modern development finance should work.
Project Finance Is More Important Than Sovereign Borrowing
Zimbabwe should therefore move away from the traditional model in which Government borrows against the national balance sheet and then distributes the money across projects.
A modern development-finance architecture would identify economically viable projects, ring-fence their revenues, structure debt against those cash flows and bring private and institutional capital alongside public resources.
The IMF’s 2026 programme itself recognises the importance of properly structured public-private transactions, requiring feasibility assessments and ring-fenced revenue cash flows for certain equity participation and joint-venture structures.
This is a much more sophisticated approach than simply accumulating sovereign debt.
A toll road should ultimately be capable of financing itself. A power station should generate revenue. A railway should generate freight income. A port or logistics corridor should generate fees. A mineral-processing facility should generate export receipts.
That is the essence of development banking: turning productive assets into investable financial instruments.
Zambia Provides a Powerful Warning
Zambia offers an important lesson.
Its debt restructuring involved official creditors, commercial creditors and bondholders rather than simply settling one category of arrears and assuming that international capital would immediately return.
The country’s Official Creditor Committee agreed a restructuring framework, while Zambia simultaneously negotiated with Eurobond holders and other commercial creditors. More than 90% of bondholders ultimately participated in the Eurobond exchange.
The IMF subsequently assessed Zambia’s debt as sustainable on a forward-looking basis under its post-restructuring framework, although the country remained at high risk of debt distress in the near term.
The lesson is particularly relevant to Zimbabwe. Creditors have to be considered collectively.
A sovereign cannot restructure one part of its balance sheet while pretending that the remaining liabilities do not matter.
Zambia Also Demonstrates Why Creditor Coordination Matters
Zambia’s experience illustrates another principle: creditors negotiate collectively because they want comparability of treatment.
Official creditors want private creditors to participate. Bondholders want to know that other creditors are making comparable sacrifices. Multilateral institutions want assurance that the country’s debt trajectory is sustainable.
Zimbabwe therefore needs a comprehensive restructuring architecture in which every creditor understands the overall settlement.
The objective should be to produce a debt stock that is sustainable rather than merely to produce a short-term cash-flow improvement.
The Paris Club Cannot Simply Be Treated as the Owner of the Multilaterals
There is another part of the argument that requires careful qualification.
It is tempting to say that the Paris Club controls the World Bank, IMF and African Development Bank and therefore controls the entire debt-resolution process.
That is too simplistic.
The Paris Club is an informal group of creditor governments. The World Bank and IMF have their own governance structures and voting systems, while the African Development Bank is governed by its own membership and institutional arrangements.
The United States is the largest shareholder in the World Bank and has considerable influence in the international financial architecture, but it does not literally control every multilateral institution or every creditor decision.
The geopolitical reality is nevertheless important.
The United States has enormous influence in global finance, while Paris Club governments remain important bilateral creditors. Zimbabwe’s debt diplomacy therefore cannot be reduced to a technical negotiation with individual institutions.
It requires geopolitical financial diplomacy.
The Chissano Process Should Not Be Misread
Zimbabwe’s Structured Dialogue Platform, initially facilitated by former Mozambican President Joaquim Chissano, was designed precisely to create a mechanism for dialogue among Zimbabwe, creditors and development partners.
The African Development Bank has described the platform as central to Zimbabwe’s arrears-clearance and debt-resolution process.
The lesson from that process is not necessarily that dialogue failed.
Rather, it demonstrates how difficult comprehensive sovereign restructuring becomes when creditors have different political interests, institutional mandates and expectations.
Zimbabwe therefore needs to return to the negotiating table with a stronger economic proposition.
Not simply: “We need money.” But: “Here is the economic architecture that will make your existing claims more valuable and our future obligations sustainable.”
Mutapa Could Become Part of the Solution
This is where Zimbabwe’s state-asset architecture becomes potentially important.
The Mutapa Investment Fund was created as a vehicle for managing and commercialising state assets. Properly structured, such an institution could become more than a government investment vehicle.
It could become part of Zimbabwe’s national capital formation architecture.
The important distinction is between selling state assets cheaply to generate immediate cash and restructuring them to create investable enterprises capable of attracting strategic capital.
Privatisation is not necessarily the only answer.
A commercially restructured state-owned company can retain meaningful national ownership while bringing in strategic investors, technology, management expertise and international capital.
That is a fundamentally different proposition.
The Saudi, Singaporean and Malaysian Lessons
The international examples are instructive.
Saudi Arabia has increasingly used state-owned investment vehicles to restructure assets, create joint ventures and attract international capital into strategic sectors.
Singapore’s state-linked corporate model similarly demonstrates that public ownership does not necessarily mean commercially inefficient enterprises. Companies connected to Temasek have been transformed into globally competitive businesses while the state retains strategic ownership.
Malaysia has also used state-linked investment institutions and strategic partnerships to build industrial capacity. These models are not directly transferable to Zimbabwe. But they demonstrate an important principle: national ownership and international investment are not mutually exclusive.
Zimbabwe could retain strategic equity while bringing international capital, technology and expertise into commercially viable enterprises.
Sandawana Is the Type of Opportunity Zimbabwe Should Be Thinking About
Consider the conceptual case of Sandawana. The value of a lithium resource is not simply the value of the ore underground.
The real economic value emerges when the country builds a chain around it: mining, processing, chemicals, cathode materials, battery components, engineering, logistics, research and eventually manufacturing.
A strategic joint venture with a global technology or automotive company could therefore create considerably more economic value than simply exporting spodumene concentrate.
The important point is not whether a hypothetical Tesla-Sandawana partnership would automatically create a US$10 billion valuation. That cannot responsibly be assumed.
The principle is that strategic partnerships can transform the valuation of natural resources by adding technology, market access, intellectual property, processing capacity and global distribution.
That is the kind of value creation Zimbabwe should be pursuing.
The State Should Monetise Assets Without Liquidating the Nation
The conventional response to a fiscal crisis is to privatise. Sell the company. Collect the money. Move on.
That can be a terrible bargain if the state sells valuable assets at distressed prices.
Zimbabwe should instead ask whether some state-owned enterprises can be restructured into commercially governed companies, recapitalised, independently audited, professionally managed and ultimately listed.
A properly structured listing on the Victoria Falls Stock Exchange could create a mechanism for international and domestic investors to acquire equity while the state retains a strategic stake.
The objective would be to transform dead public assets into productive national capital.
The Victoria Falls Financial Centre Could Become Strategic
This is where the Victoria Falls financial centre becomes potentially significant.
Zimbabwe needs an offshore-oriented financial centre capable of attracting international investors, structuring cross-border transactions and providing an institutional home for investment vehicles.
But the financial centre cannot succeed simply by changing the location of incorporation.
It requires credible regulation, independent governance, tax clarity, investor protection, arbitration mechanisms, financial reporting standards and predictable capital controls.
If those conditions are established, Zimbabwe could potentially develop a financial ecosystem around mining, infrastructure, energy, logistics and regional investment.
The country would no longer simply be seeking loans. It would be selling investment opportunities.
Development Banking Is the Missing Link
This ultimately brings the debate back to development banking.
Zimbabwe needs institutions capable of taking long-term national development objectives and converting them into investable transactions. A development bank should not merely distribute subsidised loans.
It should structure projects, provide credit enhancement, mobilise pension and insurance capital, attract foreign investors, arrange syndicated financing and prepare state assets for commercial investment.
The distinction is crucial. Development banking mobilises capital; it does not merely consume capital.
Zimbabwe has historically been far too dependent on government borrowing and donor financing without building the sophisticated institutional machinery required to convert natural resources and infrastructure into investable assets.
Debt Resolution Should Create an Equity Strategy
Zimbabwe’s greatest opportunity may therefore lie not in borrowing more but in raising more equity.
Debt creates an obligation to repay. Equity creates a partnership.
A strategic investor who acquires 30% of a restructured mining company brings capital but also technology, markets, management and credibility.
The company grows. The state retains 70%. The investor receives dividends and capital appreciation. The country gains an internationally competitive enterprise.
This is fundamentally different from borrowing US$1 billion and having the sovereign assume the repayment obligation.
The Real Constraint Is Zimbabwe’s Ability to Service Debt
There is an uncomfortable truth at the centre of the debate.
Even if Zimbabwe negotiated a substantial reduction in its external obligations, the country would still need to demonstrate the capacity to service the remaining debt.
That is where the argument becomes much harder.
Zimbabwe does not currently generate unlimited foreign exchange. Tax revenues remain constrained by the structure of the economy. The informal sector is large, while the country remains exposed to commodity cycles, droughts and external financial shocks.
The IMF’s current programme recognises precisely this constraint. Zimbabwe’s debt sustainability strategy requires not only arrears resolution but fiscal consolidation, stronger revenue mobilisation, growth-enhancing reforms and improved debt management.
Therefore, the solution cannot simply be “forgive the debt.” It must be: reduce the debt, restructure the remainder and transform the economy’s capacity to generate the income required to service it.
What Zimbabwe Should Negotiate
Zimbabwe should therefore pursue a comprehensive debt settlement rather than a narrow arrears-payment exercise.
The first objective should be a complete reconciliation of all external liabilities. The second should be a unified restructuring framework covering principal, arrears, interest and maturities.
The third should be maximum possible concessional treatment and creditor relief consistent with Zimbabwe’s demonstrated repayment capacity. The fourth should be a long transition period during which debt service remains low enough to allow economic recovery.
The fifth should be the conversion of some liabilities, where feasible, into investment, equity participation, development projects or other instruments that support productive capacity.
The sixth should be a commitment to transparent debt reporting so that Zimbabwe never again allows liabilities to accumulate invisibly.
Zimbabwe Needs a New Financial Model, Not Just New Loans
The ultimate objective should be to move Zimbabwe from a sovereign-borrowing economy to a capital-mobilising economy.
That means developing investment banking.
It means rebuilding project finance. It means creating infrastructure funds. It means developing pension and insurance capital. It means strengthening the stock exchange. It means making the VFEX a credible international capital-raising platform. It means transforming state assets into investable corporations. It means attracting strategic equity rather than merely sovereign loans. It means using development finance to crowd in private capital rather than substitute for it.
That is the difference between financing consumption and financing development.
Conclusion: Zimbabwe Should Restructure Its Debt, Not Simply Pay It
The strongest argument against an indiscriminate arrears-payment strategy is not that Zimbabwe should refuse to honour its obligations.
It is that a sovereign in financial distress should not sacrifice scarce foreign exchange merely to demonstrate that it can make a payment.
The objective of restructuring is precisely to recognise economic reality.
Zimbabwe cannot credibly service the full historical burden. Its creditors know this. Its government knows this. International financial institutions know this. The question is therefore how to restructure the obligations in a way that maximises recovery for creditors while restoring sustainable growth for Zimbabwe.
The IMF’s current programme itself recognises that Zimbabwe needs a comprehensive debt strategy, while the World Bank continues to describe the country’s debt as unsustainable and its arrears as a constraint on access to affordable finance.
That makes the policy choice much clearer.
Zimbabwe should not borrow simply to pay old creditors. It should negotiate to reduce and restructure the old debt while building the productive assets that make the remaining debt serviceable.
The country should use its natural resources, state enterprises, infrastructure assets and human capital as the foundations of a new capital-formation system.
If Sandawana can become an internationally capitalised lithium enterprise, if electricity projects can be financed against future revenues, if infrastructure can be structured through project finance, if pension funds can become long-term investors, and if state companies can be transformed into professionally governed listed corporations, Zimbabwe can begin creating capital rather than merely consuming it.
That is the strategic alternative.
The question should no longer be “Who will lend Zimbabwe money to pay its creditors?”
The more important question is: “How can Zimbabwe restructure its legacy debt while building enough productive national wealth that it never again has to depend on sovereign borrowing simply to finance its development?”
That is the real debt solution.
And that is why arrears clearance should be the consequence of a comprehensive restructuring and economic transformation strategy, not the strategy itself.
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