BERNARD MPOFU
The International Monetary Fund has warned government that it could sink into a vicious debt trap as government’s stock of commercial loans soar, it has been established.
With no budgetary support from multilateral and bilateral creditors, government shifted its focus on short term debt instruments like treasury bills and facilities from regional banks like the African Export- Import Bank (Afreximbank).
Zimbabwe is struggling to clear a debt stock of $16,9 billion, with external debt accounting for approximately $7,4 billion. Out of this, approximately $5,6 billion is in arrears.
The country settled its International Monetary Fund (IMF) arrears of $107,9 million in November 2016.
It owes the World Bank of ($1,3 billion), AfDB ($680 million) and $308 million to the European Investment Bank.
According to the IMF, Zimbabwe is among the six countries in the SubSaharan Africa region classified as being in debt distress.
The others include Chad, Republic of Congo, Eritrea, Mozambique and South Sudan. Debt dynamics for countries in debt distress or at high risk of debt distress mainly reflect large primary deficits, which for many countries widened sharply with the commodity price collapse seen last year.Sources this week told Business Times that Finance minister Mthuli Ncube and other senior government officials last week met the IMF managing director Christine Largade, Deputy Managing Director Tao Zhang, IMF Director of the African Department Abebe Selassie, and Executive Director for Africa Group 1 Constituency (Maxwell Mkwezalamba) on the sidelines of the World Bank/ IMF annual meetings in Bali, Indonesia and during this meeting the fund warned the southern African nation on its growing debt stock among other issues discussed
The IMF, sources said, has also seconded a technical expert to help Zimbabwe tackle its currency challenges. Zimbabwe ditched its local currency for a basket of multiple currencies mainly dominated by the United States dollar in 2009 to tame hyperinflation.
But since 2013, sagging exports against a backdrop of rising imports have resulted in dollar reserves running dry, putting government in a precarious situation.
Already government has implemented several austerity measures to cap expenditure and free up funds for capital projects. “It was agreed during meeting that there is need to put in place measures that would make currency reforms possible. Finance minister expressed his gratitude to the Fund for seconding a technical expert to draft a paper on currency reform for Zimbabwe,” a source said. “The IMF officials expressed fear that the country could soon get into a debt trap due to the rising debt stock or rather the number of commercial loans that the country is contracting.
This, the fund warned, will adversely affect Zimbabwe’s debt sustainability.”
Zimbabwe has also invited the IMF to undertake a supervised economic reform plan as it seeks full re-engagement with multilateral creditors.
