Zimbabwe has enlisted financial and legal advisers to aid in potential discussions with international creditors over its $21 billion debt, according to sources familiar with the matter. The southern African nation has been excluded from international debt markets since 1999 due to a default, causing interest payments to escalate as the economy faces renewed instability.
Paris-based financial advisory firm GSA & Co. SAS, founded by a former Rothschild & Co. banker, and law firm Kepler Karst, which specializes in debt restructuring, have been hired to guide Zimbabwe through debt management and restructuring efforts. The firms were engaged through the African Legal Support Facility, a body hosted by the African Development Bank that assists African governments with legal and technical support on sovereign debt issues.
Zimbabwe’s economy has struggled with severe inflation, currency devaluation, and a short supply of U.S. dollars, which are critical for daily transactions. In late September, the government devalued the local currency by 43%, with further declines in value. The country’s latest currency, the Zimbabwe Gold, has already lost an additional 6% against the U.S. dollar since its introduction, marking the sixth attempt at a stable local currency in the past 15 years.
Efforts to restructure the nation’s debt began in 2022, with the African Development Bank’s President Akinwumi Adesina and former Mozambican President Joaquim Chissano appointed to lead negotiations with major creditors, including the World Bank, the Paris Club, the European Investment Bank, and the African Development Bank.
However, Zimbabwe has not yet secured financing from multilateral lenders such as the International Monetary Fund (IMF), owing to its outstanding debt payments. The IMF has indicated that a financial arrangement would depend on a clear debt restructuring plan, including the clearance of arrears and economic reforms.
Zimbabwe is set to welcome an IMF mission this month to pursue a new Staff Monitored Program, an essential step before formally presenting a debt restructuring proposal. As of June 2024, Zimbabwe’s external debt stands at $12.3 billion, with an additional $8.7 billion in defaulted domestic debt.
While Finance Minister Mthuli Ncube has previously hinted at seeking “very deep haircuts” from creditors on the debt’s value, details on the extent of these reductions have not been disclosed.
