HARARE – Zimbabwe has made significant progress in building and strengthening public debt management capacity by setting up a dedicated Public Debt Management Office (PDMO), adoption of a modern public debt management legislation, preparation and adoption of debt management procedures manuals, and regular reconciliation of public debt database, installation of frameworks for debt data back-up.
The Public Debt Management Act promulgated in 2015 provides a comprehensive framework for public debt management, including requirements to develop and publish a formal medium-term debt management strategy based on public debt management objectives, an annual borrowing plan, and conducting annual debt sustainability analyses.
And as part of efforts to ensure government debt management operations are guided by a formal debt management strategy as provided for in the Act, the Ministry of Finance and Economic Development requested the Macroeconomic and Financial Management Institute for Southern and Eastern Africa (MEFMI) Secretariat for technical assistance in developing the country’s Medium-Term Debt Management Strategy (MTDS) and an Annual Borrowing Plan.
A medium-term debt management strategy is a plan that the government intends to implement over the medium term to achieve a desired composition of the debt portfolio, which captures the Government’s preferences regarding cost-risk trade-off.
It operationalises the debt management objective of ensuring Government’s financing needs and payment obligations are met at the lowest possible cost consistent with a prudent degree of risk. An annual borrowing plan outlines how the desired strategy will be financed over the next budgetary period.
A joint MEFMI-World Bank team provided the technical assistance through an in-country workshop earlier in July. Government’s medium-term debt strategy and annual borrowing plan, marks an exciting new chapter in the management of Zimbabwe’s sovereign debt.
Nevertheless, transition towards the envisaged debt portfolio structure may take time to be fully realised due to the country’s limited access to stable sources of external financing and the modest size of its domestic capital market relative to the size of Government’s gross financing requirements.