The African Development Bank Group president Akinwumi Adesina provided the silver lining Zimbabwe wanted in its struggles to extinguish an external debt for more than a decade.
Speaking to journalists on the sidelines of the group’s annual meetings which began Monday, Adesina said the bank was working with its shareholders and bilateral partners such as the IMF and the World Bank to help Zimbabwe extricate itself from the debt the same way they had assisted Sudan and Somalia.
“When a part of the body hurts, every part of the body hurts. We want Zimbabwe to be re-energised. We want Zimbabwe’s mines working, we want Zimbabwe’s agriculture working. We want skilled people going back to Zimbabwe,” Adesina said.
A recent International Monetary Fund (IMF) Article IV report showed that Zimbabwe will go for the Heavily Indebted Poor Countries (HIPC) Initiative or use its own resources and bridging finance to extinguish the debt.
Zimbabwe is in debt distress and the high debt level, compounded by arrears to both multilateral and bilateral creditors, undermine access to concessional resources required for Covid-19 recovery, recapitalisation of industry and investments in critical infrastructure.
The downside of that debt is that while other countries benefitted from the US$50bn windfall from the International Monetary Fund (IMF) to stabilise their economies following the effects of the Covid-19 pandemic, Zimbabwe could only watch from the sidelines, precluded by virtue of owing the African Development Bank and the World Bank.
The debt overhang is the elephant in the room for Zimbabwe as its resolution will unlock fresh lines of credit to the economy.
It will remove the risk premium which has seen local companies secure lines of credit at a higher cost.
Harare has to walk the talk to be taken seriously by creditors. A clearly defined roadmap has to be in place and followed to the letter. There is need for a package of reforms required for the implementation of the plan to extricate Zimbabwe from the current predicament.
This is not the first time that Zimbabwe has made bold steps to be in good books with the international financial institutions.
In 2015, Zimbabwe’s plans to clear US$$1.8bn arrears to three preferred creditors–the IMF, World Bank and AfDB, was approved by creditors on the sidelines of the IMF/World Bank annual meetings in Lima, Peru.
Under the plan, Zimbabwe was supposed to have cleared what it owes to the preferred creditors–IMF (US$110m), the World Bank (US$1.15bn) and AfDB (US$601m)- by the end of April 2016.
Zimbabwe also promised to develop a “new comprehensive country financing programme supported by the AfDB, IMF and the World Bank that attracts long term financing to promote growth and debt sustainability”.
It also promised to engage the European Investment Bank, the Paris Club and non-Paris Club bilateral creditors for debt resolution, on the strength of Zimbabwe’s performance on the preferred creditors.
The Lima plan suffered a stillbirth as succession politics took centre stage culminating in the ouster of the late President Robert Mugabe in November 2017.
Time is running out and Zimbabwe cannot bungle this time around.