Online Reporter
Business Reporter
FACED with substantial maturities of US dollar-denominated Treasury bonds this year, Government plans to restructure the securities to reduce debt to sustainable levels.
According to the Zimbabwe Public Debt Management Office (ZPDMO), which falls under the Ministry of Finance, Economic Development and Investment Promotion, the move is to lower debt service costs to a manageable level taking into account limited fiscal resources.
The move will also enable the Government to fulfil its debt commitments while simultaneously maintaining essential public services and promoting economic growth.
This year, maturing Treasury bonds total US$738 million, following closely on the heels of US$177 million that matured in the last quarter.
Thereafter, the Government will face maturity obligations of more than US$4,3 billion through 2034.
“In this regard, given the tight fiscal space, Government is in the process of restructuring these US dollar-denominated Treasury bonds aimed at reducing debt service to sustainable levels,” ZPDMO said in its latest report.
“The restructuring process is critical in enhancing fiscal sustainability and ensuring that Government can meet its debt obligations without compromising public service delivery and economic growth.”
Restructuring in the context of sovereign debt refers to a process of altering the terms and conditions of existing debt obligations.
This may involve extending the time frame for repayment to reduce the immediate pressure of large, upcoming payments.
Lowering interest rates can reduce the cost of borrowing and free up funds for other priorities and reducing the total amount owed lessens the overall debt burden.
In some instances, restructuring may involve switching the currency of the debt.
The specific methods chosen for restructuring depend on various factors, including the nature of the debt and the economic conditions of a country.
Zimbabwe has been relying on borrowing to partially finance budget deficits and fund critical projects.
In 2025, the Government has projected a fiscal deficit of ZiG6,07 billion.
The deficit will necessitate a gross financing requirement of ZiG25,22 billion to cover loan amortisation and maturing Government securities.
To meet this financing requirement, the Government is also planning to leverage both domestic and external sources.
Domestically, this includes the issuance of ZiG$9,3 billion in Treasury Bills and US$60 million in US-denominated TB’s through a combination of private placements and auctions.
External sources will play a significant role in financing the deficit, with the Government expecting to receive US$30,4 million from existing external loan disbursements.
Furthermore, it is currently negotiating new non-concessional external loans amounting to US$350 million.
On sovereign guarantees, ZPDMO also said outstanding guarantees as at end September 2024, amounted to US$135 million and ZiG227 million.
The Infrastructure and Development Bank of Zimbabwe (IDBZ) and AFC Holdings paid up guarantees amounting to US$500 000 and ZiG4,2 billion, respectively, over the period January to September 2024.
Guarantees amounting to ZiG165 million and US$1,33 million to the IDBZ, Zimbabwe National Road Administration, AFC Holdings and Ripe-On Private Limited are on track with the respective repayment schedules, said the debt office.
Non-performing guarantees as at end September 2024 amounted to US$128,28 million and ZiG10,13 million to CBZ AgroYield for the 2020 to 2022 agricultural seasons, NMB for flower production facility and CBZ facility to Steel Makers.
Guarantees amounting to US$5,11 million and ZiG51,61 million are still in their grace periods.
To ensure timely debt service payments, the issuance of Government guarantees is conditional on the opening of sinking funds by the borrowers, which is funded from the cash flows generated by the guaranteed projects.
