For decades, municipal bonds have played a very important role in financing urban infrastructure across the world, funding water systems, roads, housing, and public utilities that directly shape the quality of life for citizens.

In Zimbabwe, however, the municipal bond market has suffered prolonged erosion. Investor confidence has weakened, issuance has stalled, and municipalities have largely been cut off from long-term, market-based financing.

While multiple structural and macroeconomic factors have contributed to this decline, one critical issue stands out: the absence of sustained, credible, and continuously monitored credit assurance.

 

Credit Ratings: It is a Dynamic Process and not a one Time-Check

A common misconception in the market is that a credit rating shows a fixed thing, an immutable snapshot of an issuer’s creditworthiness at a single point in time. In reality, a credit rating is a continuous, live process, designed to evolve alongside the issuer’s financial, governance, and operational realities.

Globally, credible credit rating frameworks are dynamic by design. They involve ongoing surveillance, periodic reviews, and clearly defined rating actions like upgrades, downgrades, outlook changes, and, where necessary, withdrawals. This dynamism is not a weakness; it is the very mechanism that builds investor trust.

For municipal bonds in Zimbabwe to regain credibility, this distinction must be clearly understood and embraced.

 

Why Continuous Credit Ratings Matter for Municipal Issuers

Municipalities operate in flexible environments. Revenue collections fluctuate, expenditure pressures change, governance practices evolve, and policy decisions can materially alter credit risk. A static credit assessment fails to capture these realities.

 

Continuous credit ratings provide:

• Early warning indications to investors when fiscal stress emerges.

• Accountability incentives for municipal management to maintain financial discipline.

• Transparency through regular public interaction credit developments.

• Risk differentiation, allowing stronger municipalities to be distinguished from weaker peers.

In markets where municipal bonds function effectively, investors are not seeking zero risk, but they are seeking managed and well-communicated risk. Continuous ratings offer exactly that.

 

Rebuilding Investor Confidence Through Transparency

The collapse of confidence in Zimbabwe’s municipal bond market has less to do with the existence of risk and more to do with uncertainty. Investors cannot price what they cannot see.

 

A strong continuous credit rating is used to reduce opacity by ensuring that:

• Material events are promptly assessed and communicated.

• Credit deterioration is addressed through formal rating actions rather than market rumors.

• Positive reforms and fiscal improvements are recognized and rewarded.

• This transparency changes credit ratings from a one-off compliance exercise into an ongoing assurance mechanism.

 

A Route to Market Recovery

Reactivating Zimbabwe’s municipal bond market will require coordinated effort, policy alignment, fiscal reforms, governance improvements, and market education. However, none of these measures will succeed in isolation without restoring trust.

 

Continuous credit ratings can serve as the backbone of this recovery by:

• Working like a bridge between municipalities and long-term investors.

• Providing an objective framework for pricing municipal risk.

• Encouraging disciplined borrowing goes with repayment capacity.

• Supporting the gradual re-entry of institutional investors into the market.

 

Conclusion: From Erosion to Assurance

The revival of Zimbabwe’s municipal bond market will not happen overnight. It will be a slow and gradual process of rebuilding assurance where erosion once prevailed. Recognizing credit ratings as a continuous, living process more than a static judgment and it is a critical step in that journey.

When investors are confident that municipal credit risk is being actively monitored, transparently communicated, and professionally managed, capital can begin to flow again. In that sense, continuous credit ratings are not merely a technical tool, but they are a foundation for trust, resilience, and sustainable market recovery.