KEY POINTS
- Zimbabwe has hired advisers to help address its $21 billion debt that has gone into default, as the country seeks solutions to regain access to international financing.
- The move comes as Zimbabwe struggles with economic recovery, facing inflation, currency instability, and limited foreign investment.
- The country’s efforts are focused on negotiating with creditors and developing a sustainable debt repayment plan to restore confidence in its financial system.
Zimbabwe has hired financial consultants to manage the $21 billion in defaulted debt, which is a major step forward in the country’s fight against its economic problems and regaining access to foreign credit.
The debt which has been built up over years of economic turmoil and mismanagement has prevented Zimbabwe from accessing new credit and investment from international lenders.
The decision to hire advisers comes at a time when Zimbabwe is experiencing high inflation rates, unstable local currency and low foreign investment.
These factors have made it hard for the country to achieve economic growth and the defaulted debt has been a major hindrance to the country’s efforts to seek for credit facilities from other countries.
Debt crisis undermines economic growth
For many years, Zimbabwe has faced a debt challenge that has been an albatross around the country’s economic reform program. Mismanagement, corruption, and external economic shocks have over the years placed Zimbabwe in a very bad position to manage its public debt, thus defaulting on many of its loans.
Currently Zimbabwe has accumulated large debts with international organizations such as the World Bank, African Development Bank or other creditors and so there is no possibility to attract new funds into the country.
The government is under pressure to look for long-term solutions to its debt problem, which currently stands at $21 billion. As it has been reported, Zimbabwe has been in discussion with its creditors to discuss the possibility of the terms of repayment and restructuring.
This is why the appointment of financial advisers is considered as a part of this strategy, as the country is trying to develop a debt repayment plan that could help to restore the confidence in the country’s financial system and open the access to new loans.
New Zimbabwe says that the advisers will assist Zimbabwe in the negotiations with creditors, drawing up a repayment plan and considering the question of restructuring obligations, within the framework of which the creditors may offer concessions or take more time for the repayment of debts.
Measures to reestablish the country’s credibility
The appointment of financial experts means that Zimbabwe is ready to face its debt challenge squarely and regain the confidence of international lenders.
For the past few years, Zimbabwe has been locked out of international credit markets due to the defaulted debts and hence has been unable to borrow money for development projects and other infrastructural developments.
Due to lack of foreign investment and export credit facilities in Zimbabwe, the country’s economic difficulties worsened, inflation continued to rise, the Zimbabwean dollar is declining in value and unemployment is still rife.
In order to stabilize its economy, the country needs to persuade the international creditors that it is committed to paying its debts and enacting the fiscal changes that will help to restore the economy.
The decision to hire advisers also shows that the government understands that it cannot fight this problem on its own. Through consulting experts, Zimbabwe is preparing to negotiate with creditors and possibly get better conditions for the restructuring of the debt.
Hope for economic recovery
However, there is light at the end of the tunnel as Zimbabwe seeks to clear its $21 billion debt in a bid to kick start the economy.
If successful, there could be increased access to new loans and forcefully opened investment opportunities essential in the development of the strategic sectors of the economy such as agriculture, mining, and manufacturing.
Sustainable debt repayment strategy may also reestablish credibility in the Zimbabwe’s financial sector, hence bringing back investors both from the home and from the foreign.
However, the journey is not going to be easy, but, in the right direction the government has decided to appoint financial advisers to extricate from the debt trap and prepare a direction for the long-term sustainable growth.
