HARARE, July 7 (The Source) – Zimbabwe is close to finalising a nearly $1 billion loan from the African Export-Import Bank (Afreximbank) to clear its debt arrears with multilateral institutions after a proposed funding deal with Algeria fell through, officials have said.
The southern African country is in the throes of a deep liquidity crunch and is trying to emerge from years of international isolation. It however, needs to clear arrears of $1,8 billion to the World Bank, the International Monetary Fund (IMF) and the African Development Bank (AfDB) before it can access new credit to revive its faltering economy.
It is also facing risks to the already difficult economic outlook from the prolonged adverse weather conditions, weak commodity prices and erratic policy implementation.
Harare is expecting its first loan since 1999 from the IMF later by December this year, after meeting targets under a 15-month IMF staff monitored programme, an informal agreement between a government and IMF staff to monitor implementation of economic reforms.
Zimbabwe’s foreign debt stands at $10 billion, of which $1,8 billion is arrears. Countries are required to clear all arrears with multinational lenders before engaging in talks with creditors.
In a story quoting the governor of Zimbabwe’s central bank, John Mangudya, the Financial Times reported on Wednesday that the Afreximbank was arranging a seven-year loan of $986 million so the country could pay back arrears to the World Bank.
The new agreement appears to replace the proposed lending from Algeria, which was proposed in April this year but whose ability to loan has been hit by falling oil prices.
“What we can tell you is that, obviously, if things move well, we are expecting balance of payments support from the IMF,” Mangudya told the FT.
Mangudya said Zimbabwe expects to have paid back its arrears in time for the board meetings of the IMF and AfDB in September.
Zimbabwe also hopes to clear its debt of $110 million to the IMF against a special drawing rights (SDRs) allocation of around $130 million from the Fund, finance minister Patrick Chinamasa said at a briefing at London-based think-tank Chatham House earlier this week.
Chinamasa and Mangudya’s efforts to address the deepening economic malaise come against increasing public unrest at home.
On Wednesday, business ground to a halt in Zimbabwe’s capital Harare and other major towns in one of the biggest protests against President Mugabe’s rule in a decade.
Most businesses and foreign banks shut down as people largely heeded calls by grassroots activists to stage a nationwide shutdown in protest against high unemployment, an acute cash shortage and corruption.
Most businesses and banks reopened on Thursday.