leeroy mupariri
Business Reporter
GOVERNMENT recently reiterated its commitment to issuing a US$100 million bond on the Victoria Falls Stock Exchange (VFEX) to mobilise resources it needs to finance critical infrastructure projects.
This is critical to the country’s long-term goal of achieving upper middle-income status by 2030 under Vision 2030.
According to Finance, Economic Development, and Investment Promotion Minister, Professor Mthuli Ncube, while the initiative has faced some delays, as Treasury treads cautiously to manage the cost of new debt, this remains a priority.
This comes as the country is pursuing viable strategy to retire just over US$21 billion sovereign debt, a significant part of which is over due.
It has already enlisted African Development Bank president Dr Akinumwi Adesina and former Mozambican leader Joachim Chissano to assist in coming up with an effective debt resolution framewotk.
The debt is owed to creditors that include the AfDB, World Bank, European Investment Bank and Paris Club among others.
“Issuing a bond means increasing debt, so we are carefully assessing what this debt will finance,” Minister Ncube said.
The bond proceeds are intended to fund key projects such as road rehabilitation, healthcare facility upgrades, and irrigation infrastructure.
Economist Tinevimbo Shava said a debt instrument such as the proposed bond was vital for Zimbabwe’s developmental aspirations.
“Vision 2030 requires robust investment in infrastructure, but such funding cannot rely solely on traditional government revenues,” Mr Shava said.
“Bonds enable governments to mobilise large-scale resources while spreading repayment obligations over time.”
Investment analyst Shadreck Kadiki agrees, noting that bonds allow governments to stimulate economic activity without immediate inflationary pressures.
“Unlike printing money, which can destabilise the economy, bonds are a market-based approach that creates opportunities for local and international investors to contribute to development,” he said.
Despite these advantages, Zimbabwe’s bond market faces challenges, as evidenced by issues that hampered the earlier planned US$200 million bond issuance.
Guaranteed bonds, while offering enhanced investor confidence, come with significant upfront costs in high-debt economies.
Minister Ncube acknowledged the challenge, pointing out that efforts to secure affordable global insurance were stymied by steep costs.
“What we wanted was to buy insurance globally to raise the credit standing of the bond, but the extra yield we had to pay as a government without insurance was almost equivalent to the insurance cost itself,” he explained.
This led to the decision to proceed without external guarantees, a move analysts believe requires careful risk management to succeed.
Zimbabwe’s Vision 2030 hinges on overcoming its infrastructure deficit, which experts estimate requires at least US$2 billion annually.
Mr Shava underscored the importance of timely execution of the bond issuance.
“The US$100 million bond is not just about financing projects but signalling Zimbabwe’s commitment to fiscal responsibility and market-based solutions.”
Mr Kadiki elaborated on the matter, stating that successful bond issuance can enhance Zimbabwe’s credibility in international markets, attracting much-needed foreign direct investment.
“This is an opportunity for Zimbabwe to demonstrate that it can manage its finances prudently, paving the way for future investment inflows,” he said.
The US$100 million bond is a litmus test for Zimbabwe’s ability to leverage debt markets to spur development. As the Government moves forward, success will hinge on transparent processes, realistic pricing, and clear communication with stakeholders.
For Zimbabwe to achieve its Vision 2030 targets, investments in infrastructure and human capital must remain at the forefront. The issuance of bonds, despite its challenges, offers a pathway to unlocking the country’s economic potential.
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