Government’s latest attempt to tackle Zimbabwe’s ballooning external debt may be walking a fine line between innovation and risk, Mining Zimbabwe reports.
By Ryan Chigoche
This comes as Finance, Economic Development, and Investment Promotion Minister Mthuli Ncube recently revealed that authorities are exploring the use of the country’s vast mineral wealth, including platinum, gold, and lithium, to help clear part of the US$13.2 billion owed to foreign creditors.
He said the government has already begun servicing some arrears through a platinum-backed arrangement and is working to expand similar resource-based mechanisms to address the broader debt burden.
While the plan is seen as a creative way to leverage natural endowments, development economists are warning that without transparency and sound governance, Zimbabwe could end up worsening the very problem it seeks to solve.
The country’s debt crisis has long been a drag on growth and investor confidence. As of December 2024, Zimbabwe’s total public and publicly guaranteed debt stood at US$21.5 billion, or 47.1% of GDP, with US$13.2 billion owed externally and US$8.3 billion domestically. More than 70% of the external arrears are interest-related, a sign of how long Zimbabwe has been unable to access fresh concessional funding.
Zimbabwe’s main creditors include the World Bank (US$1.48 billion), African Development Bank (US$671 million), European Investment Bank (US$372 million), Paris Club lenders (US$3.55 billion), and non-Paris Club creditors (US$2.22 billion). Past efforts to clear arrears, such as the 2015 Lima Strategy and partial payments to the IMF in 2016, failed to unlock new credit lines. Even a more recent US$2.6 billion bridge financing proposal from the AfDB has stalled amid governance and policy credibility concerns.
Against this backdrop, analysts say the idea of resource-backed debt is not new, but it is fraught with pitfalls.
Speaking to Mining Zimbabwe, Morgan & Co. Head of Research Tafara Mtutu said using minerals to repay debt could have unintended consequences if underlying governance problems persist.
“In my humble opinion, I’m not optimistic about this because when you look at why we are in this debt conundrum in the first place, it’s not that Zimbabwe lacks the expertise to generate returns from borrowed funds, but rather a lack of proper governance by those entrusted with public resources,” Mtutu said.
He added that resource-backed loans — where underground assets are used as collateral — have often worsened debt distress in developing countries. “There’s a good chance that we could actually make the situation worse,” he noted, cautioning that such deals can be opaque and difficult to renegotiate if commodity prices fall.
Economist Chenai Mutambasere echoed similar concerns, saying the feasibility of turning mineral wealth into reliable debt repayments remains highly questionable.
“Minerals are physical assets while debt repayments require liquid hard currency,” she explained. “Turning ore in the ground into cash flows depends on efficient extraction, transparent contracts, and global demand — all areas where Zimbabwe has struggled due to governance weaknesses and underinvestment in mining.”
She added that relying on mineral-backed loans could expose the country to dangerous price shocks. “Global commodity prices are notoriously volatile; a slump in platinum or lithium could suddenly undermine repayment capacity,” she warned.
Mutambasere said the biggest risk lies in governance failures. “Zimbabwe’s mining sector is plagued by opacity and elite capture, raising fears that debt-for-minerals deals will enrich a few while entrenching corruption. Without reforms to strengthen institutions and diversify revenue, relying on minerals to service debt is unsustainable. At best, it only buys time; at worst, it deepens the resource curse.”
Analysts point to examples across Africa where similar approaches have gone wrong. In Angola and Congo-Brazzaville, opaque resource-backed loans led to undervalued mineral assets, mounting debt, and lost revenues. Experts warn Zimbabwe could face the same fate unless it strengthens transparency, ensures competitive contract terms, and links such deals to tangible economic outcomes.
The country’s long-term debt sustainability will depend less on what is mined and more on how its resources are managed. Stronger fiscal discipline, credible re-engagement with creditors, and reforms that restore confidence in governance remain key to breaking the debt cycle. Without that, economists say, mortgaging minerals may provide only temporary relief — at the cost of future generations.
