Ncube vows to clear debt arrears by March

PHILLIMON MHLANGA

ZIMBABWE will stick to its plan to clear debt arrears amounting to US$2bn owed to the World Bank and the African Development Bank by March next year as it moves to unlock fresh lines of credit, Finance minister Mthuli Ncube has said.

The country, which has suffered from decades of decline, has been ineligible for fresh credit from global funders because of Western-imposed economic sanctions and also defaulting on its debt at the turn of the century. The resolution of the debt crisis is seen as a critical step in economic recovery.

Minister Ncube said clearing the arrears to the two multilateral financial institutions was important to Zimbabwe’ s economic recovery, as it is seen as a major step for the country’s return to the international markets.

“I will stick to the first quarter of next year plan,” Ncube promises.
“Come to me at the end of March 2020, and ask where are you, Minister? I will tell you that we have cleared all our debt arrears,” Ncube told Business Times.

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.

In 2016, the AfDB agreed to ringfence Transition Support Facility Pil-
lar II resources for arrears clearance of Somalia, Sudan and Zimbabwe
on a first come, first served basis. To get new funding from the AfDB,
Zimbabwe, which is classified as one of the vulnerable economies on the
continent together with Somalia and Sudan, needs to clear its arrears first
before December 2020 when the funds are still available.

In 2015, Zimbabwe came up with a debt and arrears strategy to repay
the US$1.8bn owed to the IMF, World Bank and AfDB. The strategy was signed with the three institutions in Lima, Peru.

Ncube said once the government cleared the debt arrears to the World
Bank and AfDB, focus will shift to bilateral debts with the Paris and
non-Paris Club members.