The African Development Bank (AfDB) has issued a stark warning about Zimbabwe’s increasing reliance on natural resource mortgages to secure external financing, warning that the strategy risks further exacerbating fiscal vulnerabilities while quietly ceding control of strategic assets to external lenders.
In two newly released reports – the Zimbabwe Natural Resource Country Analysis and accompanying policy brief – the continent’s financial institutions say Zimbabwe is increasingly relying on resource-backed loans to fund infrastructure and energy projects, and the People’s Republic of China is emerging as a major beneficiary of these arrangements.
The Bank acknowledged that these loans were helping the country rebuild critical infrastructure, but warned that weak transparency, limited parliamentary oversight and opaque contract structures could pose long-term risks that outweigh short-term development gains.
From 2004 to 2019, Zimbabwe mortgaged mineral resources worth an estimated US$2.87 trillion to China, primarily through loan agreements with the Export-Import Bank of China. The bank said these arrangements tie future mineral revenues to debt service obligations at a time when Zimbabwe remains vulnerable to commodity price fluctuations and has limited access to traditional capital markets.
“China has been a key partner in Zimbabwe’s introduction of resource-backed financing and has financed several innovative projects aimed at solving development challenges,” the AfDB said. “However, as public debt continues to rise, future efforts must be carefully structured to protect fiscal sustainability and the sovereignty of national resources.”
Among the largest projects financed through these mortgage-style arrangements was the US$998 million expansion of the Hwange thermal power station, which significantly increased power generation capacity and alleviated chronic power shortages that were hurting industrial productivity. Another flagship project was the US$150 million renovation of Victoria Falls International Airport, completed in 2016, which increased passenger handling capacity from approximately 500,000 to approximately 1.5 million travelers.
While the AfDB acknowledged that these projects had delivered tangible benefits, particularly in energy security and tourism development, it warned that the governance framework supporting resource-backed borrowing remained dangerously weak.
The bank cited a lack of strict contractual disclosure requirements, limited parliamentary oversight, and a lack of institutional oversight as key weaknesses. The report noted that approximately $1.2 billion worth of active projects remain tied to resource-backed repayment structures, primarily in the energy and mining sectors.
“Lower global mineral prices and rising debt levels have increased repayment risks,” the Bank said, warning that unfavorable market movements could rapidly destabilize finances if collateral proceeds become insufficient.
Besides China, the bank named Russia and India as other countries to which Zimbabwe has promised resources in exchange for loans in sectors such as mining, agriculture and energy. The AfDB warned that a web of largely opaque lending arrangements between the two countries was increasing the risk of debt becoming fragmented and difficult to manage.
The lender urged Zimbabwe to fundamentally rethink its approach to resource-backed borrowing, stressing that future deals must be based on a transparent rules-based framework in line with the national development strategy. It called for full Congressional oversight of all such agreements, an independent valuation of the collateral pledged, and the selection of competitive lenders to ensure value for money.
“All resource-backed transactions should be informed by independent technical and financial assessments, fiscally prudent repayment structures, and clear deadlines,” the Bank said, warning that improperly structured deals could hinder rather than unlock future growth.
To reduce exposure, the bank recommended the use of special purpose vehicles to ring-fence the revenues generated by resource-based projects and ensure that funds are strictly directed to clearly defined infrastructure and social development priorities. It also called for comprehensive disclosure of contracts, including repayment terms and beneficial ownership, as a basis for accountability and public trust.
Regular debt sustainability assessments, integrated into a broader macroeconomic risk management framework, were explained as essential to prevent debt crises due to commodity price shocks or tightening external financing conditions.
Across Africa, resource-backed financing is becoming increasingly attractive to governments facing shrinking fiscal space and limited access to global capital markets. But development finance experts warn that mortgaging strategic assets often transfers risks disproportionately to borrowing countries and locks them into rigid repayment structures with little flexibility during economic downturns.
The AfDB warned that without strong governance, transparency and institutional safeguards, mortgaging natural resources could turn short-term infrastructure improvements into long-term development constraints.
The question for Zimbabwe is no longer whether it can deliver infrastructure with resource-backed financing, but whether it can afford to quietly give up future mineral revenues in exchange for current capital, the bank warned.
