By Newton M. Mambande
HARARE – PUBLIC debt is neither inherently good nor bad. It is a financing instrument whose value depends on how effectively it is deployed and whether the economic returns justify the cost of borrowing. As Treasury prepares the 2026 Public Debt Management Annual Report and borrowing plan, the central policy question is whether new borrowing is being directed towards productive investment that expands national capacity or towards expenditure that provides limited long-term economic returns.
Zimbabwe’s debt position in 2026 reflects two competing realities. Progress has been made in domestic debt restructuring and engagement around external arrears, but significant structural challenges remain. The sustainability of public finances will depend not only on the amount borrowed, but also on the quality, transparency and productivity of debt-financed expenditure.
The Reality of Debt Service and the Cost of Opportunity
Public debt remains elevated relative to the size of the economy, with debt servicing obligations continuing to consume a significant share of government resources.
From a public finance perspective, this creates an opportunity cost. Resources allocated towards interest payments and debt repayments are resources that cannot simultaneously support areas such as energy infrastructure, transport networks, irrigation systems and agro-processing capacity.
Borrowing can support economic transformation when it finances productive assets. However, when debt is used primarily to support recurrent expenditure, the economic multiplier tends to be weaker because it does not necessarily expand the productive base required to repay that debt in the future.
A sustainable fiscal strategy therefore requires a balance between meeting existing obligations and protecting investment spending that supports long-term growth.
Three Structural Challenges Facing Debt Management
Borrowing Must Prioritise Productive Assets
One of the central considerations in public debt management is the purpose for which funds are raised. Borrowing that finances productive infrastructure can create future economic benefits through higher output, increased exports and expanded revenue generation.
Investments in irrigation, rural roads, energy infrastructure, logistics systems and agro-processing facilities have the potential to strengthen productive capacity. By contrast, borrowing directed towards short-term consumption provides fewer opportunities to generate future returns.
The guiding principle should be that public debt supports assets capable of contributing to economic growth and improving the country’s ability to service its obligations.
Contingent Liabilities Require Greater Transparency
Public debt assessments should also consider potential obligations arising from state-owned enterprises, public-private partnerships and government guarantees.
These commitments may not always appear immediately in headline debt figures, but they can create future fiscal pressures if supported entities experience financial difficulties. A comprehensive and regularly updated contingent liability framework would strengthen transparency and improve understanding of the country’s overall fiscal position.
Greater disclosure can also contribute to improved investor confidence and potentially lower risk perceptions.
Managing Currency and Refinancing Risks
Zimbabwe’s debt portfolio faces challenges associated with currency composition and maturity structures. A significant portion of external obligations is denominated in foreign currencies, while domestic revenues are generated through a combination of local and foreign currency sources.
Exchange rate movements can therefore influence debt ratios and repayment capacity. In addition, reliance on shorter-term domestic instruments to finance longer-term projects can create refinancing pressures.
A stronger asset-liability management approach would help align the timing, currency and cost of borrowing with the expected returns from public investments.
Building a Debt Strategy Focused on Development
For debt to become a tool for economic transformation, borrowing decisions should be guided by clear investment priorities.
First, new borrowing should be linked to projects with measurable economic returns. Energy generation, irrigation, transport infrastructure and agro-processing investments can reduce production costs, improve competitiveness and strengthen export potential.
Second, external financing arrangements should maximise domestic economic benefits. Infrastructure and agricultural projects should encourage local participation, develop domestic supply chains and support employment creation where practical. This ensures that borrowed funds contribute not only to physical assets but also to broader economic activity.
Third, Zimbabwe requires a credible and transparent roadmap for addressing external arrears. Progress towards improved relations with international financial institutions can expand access to more affordable sources of financing and reduce reliance on expensive borrowing.
Finally, debt governance must remain transparent. Publishing key information on loan agreements, project assessments and repayment obligations can strengthen accountability and public confidence. Effective oversight ensures that borrowing decisions are aligned with national development priorities.
The Link Between Debt, Inflation and Food Security
Public debt management has direct implications for households and businesses. Excessive domestic borrowing can affect the availability and cost of credit in the economy, while external debt obligations can increase demand for foreign currency.
These pressures can influence exchange rate stability, inflation dynamics and the cost of essential goods, including food. A sustainable debt position therefore supports not only fiscal stability but also broader economic welfare.
Food security, currency stability and fiscal discipline are closely connected. A stronger productive economy improves the ability to manage debt while reducing vulnerability to external shocks.
A Fiscal Rule for Sustainable Borrowing
Zimbabwe’s long-term debt strategy would benefit from a clear fiscal principle:
“New public borrowing should prioritise assets that generate foreign exchange, food production capacity or employment opportunities within a defined timeframe.”
Debt should help build infrastructure, expand productive industries and strengthen economic resilience. It should not become a substitute for addressing persistent fiscal imbalances.
The challenge facing Zimbabwe is not simply the size of public debt, but the effectiveness with which debt is used. The 2026 Public Debt Management Strategy presents an opportunity to move from managing financial pressures towards financing sustainable economic growth.
The country does not require borrowing for its own sake. It requires strategic borrowing that expands productive capacity and delivers measurable economic value.Newton M. Mambande is an entrepreneur and researcher with published scientific research scholarship in academic journals. He writes on public policy, agriculture and financial economics. He is reachable at newtonmunod@gmail.com or +263 77 341 1103.
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