The economic historical backgrounds of many developing countries, Zimbabwe included, have for many decades depended upon foreign aid dating back to the early years in the creation of the African debt crisis, now commonly referred to as the African debt cancer, in the 1970s. Given that these countries are the least developed, they inevitably required, and still require, external assistance from both international financial institutions and highly developed countries to finance their developmental projects and import various key commodities.

However, regardless of the vast amounts of aid that the continent has received over the decades, the resources have not satisfied the development needs of these countries. Instead, it has led to the region accumulating insanely high amounts of external debt with little to show for it in terms of both economic growth and development.

Latest data from the Zimbabwe Public Debt Management Office (ZPDMO) reveal that Zimbabwe has just shy of US$18 billion in total public debt as of September 2022. The debt includes arrears and penalties which have accumulated over the years. This stock of debt has made it nearly impossible for the government of Zimbabwe to access loans and advances at concessional loans from various international financial institutions leaving the country to develop using limited and narrowly stretched internal resources.

Given that the reckless and over-borrowing made in the past has led the country into debt distress and the current debt overhang, it is imperative to briefly highlight and appreciate the various avenues that the government has taken in trying to correct past economic mistakes. The following are various alternatives to external borrowing that have been undertaken by several high-income and middle-income economies and which Zimbabwe has also adopted.

Resource mobilization through diaspora remittances.

According to recent data from the Ministry of Finance and Economic Development (MoFED), Zimbabwe took receipt of approximately US$1.5 billion in secondary income in the second half of 2022 with diaspora remittances accounting for over 62 percent at US$937 million. In the fiscal year of 2022, the country is expected to rack in US$1.9 billion in diaspora remittances and US$2 billion in 2023. Diaspora remittances have become one of the top foreign currency inflows for the country which have buoyed the recorded current account surpluses over the last four years.

Given that most of the country’s citizens migrated to neighbouring countries, at the height of the 2007/8 economic crisis and more recently in 2019, particularly in South Africa in search of greener pastures, remittances have since assumed an important role as a source of foreign currency for Zimbabwe and the Sub-Saharan Africa (SSA) region at scale.

The issue is for policymakers to devise ways to tap into these remittances such that they can be channelled towards developmental projects coupled with increased flows through formal channels and not just be highly concentrated for consumption purposes only. Although the government has made concerted efforts to reduce remittance fees, it has however failed to seize an opportunity to have a portion of the remittances invested in various sectors of the economy to speed up the process of industrialization, and in the process increase revenue for the government, which is at the core of the country’s drive towards an upper middle-income economy by 2030.

Resource mobilization through diaspora bonds.

China and India, among other highly industrialized countries, raised significant amounts of funds in their initial growth stages through the issuance of diaspora bonds. The Government of Zimbabwe (GoZ) took a leaf from the growth stories of these countries, rather than reinventing the wheel, and hinted that they would soon introduce a diaspora bond in the coming few years as a way to raise additional resources to fund various developmental projects.

Although the innovative mechanism is commendable, Zimbabwean nationals in the diaspora may be less willing or have a weak desire to contribute to the development of their home nation due to policy inconsistencies and economic turbulence experienced in the last four decades. The government, therefore, have to show a strong position of sincerity and assure that bondholders will be paid their agreed coupons together with the principal amounts in the agreed currency.

Resource mobilization through domestic capital market.

It is believed that for a country to record noticeable and massive productivity growths in the shortest possible period, it requires enormous amounts of foreign inflows, particularly in the form of foreign direct investment (FDI). However, given Zimbabwe’s perceived high political and economic risks, FDI flows to Zimbabwe have been relatively low over the period standing at US$194 million in 2020 and estimated at US$166 million in 2021, according to a UNCTAD World Investment Report (2021).

While delivering the 2023 national budget, the minister of Finance highlighted that the government would finance 2023 projected over ZW$500 billion budget deficit through the issuance of treasury bills and the issuance of a US$100 million bond on the US-dollar denominated bourse, the Victoria Falls Stock Exchange (VFEX). The government has therefore taken advantage of the local domestic markets to raise funds to finance several government projects. In addition, government and non-government public sectors, such as energy, telecommunications, and roads, among others, can also mobilize capital through the issuance of bonds. Of late, the National Railways of Zimbabwe (NRZ) pension fund expressed its interest to list a real estate investment trust in 2023 as a way to raise capital and in the process reward various interested investors through monthly or quarterly premium payouts.

The not-so-alien economic and political instability in Zimbabwe comes at a price in the form of narrow and thinly developed domestic financial markets coupled with low savings rates.

Resource mobilization through reverse capital flight and securitization of precious minerals.

Zimbabwe is endowed with massive natural resources dominated by minerals and the much awaited and most anticipated results from the exploration of oil and gas in Muzarabani, which when discovered will be a breakthrough for the landlocked Southern Africa nation. However, despite the massive resource endowments, the record of benefits accruing from the resources has been abysmal, especially for the communities located in these mineral mines and belts. In particular, gold smuggling, among other minerals, outside the country by elite leaders and the economically and politically connected has been high and has deprived the country's populace of the level of development it deserves. Therefore, the government can thus ensure that wealth accrues in Zimbabwe by stemming the outflow of precious minerals through informal channels and recovering the smuggled minerals, hence reverse capital flight. This at the very least can be achieved through the establishment of an independent corruption commission with prosecuting powers and not just whistleblowing capabilities.

Similar to the issuance of diaspora bonds, the government made massive developments by changing the way royalties will be paid going forward, with the authorities insisting that a part of the royalties should be paid in the minerals’ mined themselves. This will largely contribute to the buildup of reserves in the country and the government can therefore use these minerals as collateral to access the much-needed credit from either international financial institutions or other countries.

Tying all threads, despite economy-wide criticism from various economic agents that the government is in fact making things worse, with some claiming that the operating economic environment is worse than that of 2008, the government has made concerted efforts to steer the economy towards achieving a huge milestone, vision 2030. This is also despite the rise in the manufacturing sector capacity utilization which stood at 57% at the end of Q3 2022, according to the latest CZI manufacturing sector survey report, from around 45% in 2018.