Zimbabwe’s arrears clearance plan endorsed by international creditors

Zimbabwe’s arrears clearance plan endorsed by international creditors

By Nelson Banya and Kuda Chideme HARARE, October 9 (The Source) – Zimbabwe’s plan to clear its arrears with international creditors by April 2016 was approved by the International Monetary Fund, World Bank and African Development Bank on Thursday, finance minister Patrick Chinamasa has announced, a significant step towards the southern African country’s bid to access fresh loans from global lenders.

International lenders, including the multilateral institutions, the Paris Club and bilateral creditors such as China, are keen to see capital starved Zimbabwe clear its arrears before committing any fresh loans.

“I am pleased to report that there was strong endorsement among creditors to support Zimbabwe’s strategy to clear the arrears to the three IFIs as preferred creditors,” Chinamasa said in a statement released on Friday.

“Hence, the road map to clear arrears by the end of April 2016 allows for time for the IFIs to develop a new financing programme for Zimbabwe.”

Although full details of the arrears clearance plan are not yet available, Chinamasa said it entailed using a combination of the country’s own resources, arrangement of bridge finance with regional and international banks, as well as use of bilateral loan facilities.

The strategy also involves engagement of the European Investment Bank, the Paris Club and non-Paris Club bilateral lenders such as China for debt clearance. The plan also proposes the development of a ‘comprehensive country financing programme’ supported by the AfDB, IMF and World Bank to attract long-term funding to promote growth and sustainable debt sustainability.

Zimbabwe’s total external debt stands at $10.8 billion, according to Chinamasa, with $6.8 billion of that being public debt and remainder being private sector loans.

The country’s arrears with the three IFIs are broken down as AfDB ($601 million), IMF ($110 million) and World Bank ($1.15 billion).

The IMF’s Zimbabwe representative Christian Beddies told Reuters in a Sept.21 interview that the country, which last got IMF loans in 1999, might start accessing financial support from the Bretton Woods institution as early as 2016 if foreign creditors accept Harare’s arrears clearance plan. Zimbabwe would also need to stay the course of reforms it has undertaken to pursue, the IMF official added.

Since June 2013, Zimbabwe has been under an IMF staff monitored programme – an informal collaboration between the Fund and a member state on implementing agreed reforms but which does not entail funding.

Zimbabwe’s economy, which declined by as much as 40 percent between 2000 and 2008 according to government figures, registered marked recovery starting in 2009 when it dollarized under a power-sharing government formed by long-ruling President Robert Mugabe and the opposition, but has seen growth stalling since a disputed 2013 election won by the veteran ruler.

However, the IMF has commended Zimbabwe’s progress under the staff monitored programme, saying the country had managed to meet most of its set targets.

The approval of Zimbabwe’s arrears clearance plan is a major coup for treasury chief Chinamasa — who has in the past month faced criticism from two of his Cabinet colleagues over his re-engagement with the IMF — and his counterpart, central bank governor John Mangudya, given the turbulent relations between Zimbabwe and the Fund since the turn of the century.

The IMF, which Mugabe famously likened to the devil in a 2006 interview, suspended Zimbabwe’s voting rights in 2003 and came within days of expelling the southern African state in 2005.

Zimbabwe’s voting rights were subsequently restored in 2010.