Finance Minister Mthuli Ncube yesterday said the government is now at an advanced stage of coming up with a new debt arrears clearance plan as it seeks to normalise relations with various multilateral and bilateral financial institutions.
Zimbabwe has been battling to clear arrears amounting to about US$6.5bn.
Out of this, Zimbabwe owes the World Bank and the African Development Bank about US$2bn. The balance is owed to Paris and non-Paris Club creditors, among others.
Zimbabwe’s failure to clear arrears has resulted in the country failing to unlock fresh capital from global funders.
“To this end, the government is committed to normalising relations with creditors to clear arrears and unlock such resources. In this regard, let me take this opportunity to inform you that we are now at an advanced stage in the formulation process of the Arrears Clearance Strategy which will share in the future,” Ncube, who spoke at the launch of the African Development Bank Zimbabwe country brief (2021 – 2023) in the capital said.
Zimbabwe missed several targets in settling the debt arrears in the past few years.
The debt has affected Zimbabwe’s credit rating, making it a pariah in international capital markets. Clearing the debt, therefore, is a binding prerequisite for securing new international capital.
In 2016, Zimbabwe paid off its arrears to the IMF, an institution many creditors take a cue from.
But Zimbabwe still owes the World Bank about US$1.3bn and the African Development Bank (AfDB) about US$601m, hampering its ability to tap into development financing from the two critical institutions.
Ncube noted that the government was aware of the substantial investments required by the private sector in addressing the dilapidated industry infrastructure, retooling exercise and importation of raw materials.
The Reserve Bank of Zimbabwe, in its weekly foreign currency auction system, has taken a deliberate move to avail more foreign currency towards industrial retooling exercise and procurement of raw materials.
Ncube noted that the government was pleased to note that AfDB has pledged to assist in areas of capacity building and promote access to capital through the private sector support windows available.
The AfDB country brief was regarded as a milestone indication of continued cooperation and support coming from AfDB, which also comes with financial support to complement government efforts in addressing the socio-economic challenges.
The country brief was a result of extensive consultations with key stakeholders in government as well as development partners and the government is confident this will bring the desired positive contributions to the targeted areas of support.
The country brief will be financed with resources from the ADF-15 Performance-Based Allocation amounting to US$10.5m earmarked for supporting projects.
AfDB is also in a position to support non-sovereign operations under Private Sector operations with annual headroom of UA50m.
“The support could not have come at any other opportune time than now when the government has taken a deliberate move towards a private sector-led economy, with the government playing a facilitatory role. We acknowledge support which has been extended to CABS, Olivine, and Lake Harvest,” Ncube said.
AfDB country manager Moono Mupotola said the bank is one of the key development partners in Zimbabwe with a portfolio of approximately U$240m primarily in infrastructure, finance, agriculture, industry, and governance.
She said the banks’ focus is to work closely with other international financial institutions, development partners, and government in finding a resolution to this challenge as well as, provide technical assistance.
On the implementation of the country brief with limited resources and a tight timeline, the bank’s board of directors approved a strategy for Zimbabwe, which will run until 2023 in May this year.
The country brief or strategy is built around two pillars which entails supporting Zimbabwe’s private sector, which has been severely impacted by years of economic distress. The focus is to strengthen resilience and build competitiveness by improving the private sector’s productive capacity through an improved business climate, ecosystem, infrastructure, and also to leverage the opportunities the AfCFTA offers.
The second pillar is governance, with emphasis on deepening accountability, and institutional reforms in areas such as public finance management, institutional strengthening of key governance institutions including Parliament, ZIMRA, and support to reforms in the energy sector.