NDAMU SANDU
The United States has thrown its weight behind Zimbabwe’s debt plan with Washington urging Harare to undertake economic and political reforms.
Zimbabwe has appointed African Development Bank Group (AfDB) president Akinwumi Adesina to lead the process as Harare seeks to resolve its US$14.4bn external debt.
Adesina was in Zimbabwe last week where he met President Emmerson Mnangagwa, senior Treasury officials, the private sector CEOs and development partners to “listen, understand and appreciate what needs to be done to get where we need to get to”.
In a tweet, the US Embassy in Zimbabwe said Chargé Arthur Brown “welcomes AfDB President Adesina’s efforts to work on Zimbabwe’s debt issues”.
“We encourage Zimbabwe to develop a feasible plan to address its heavy debt burden and welcome dialogue on this issue. The path to debt relief is political and economic reform,” the Embassy said.
Zimbabwe is banking on Adesina’s pulling power with the banker calling for combined efforts to address the debt issue which is critical in unlocking fresh lines of credit for the country.
“I will not work alone. I will work closely with the President, Minister of Finance and all the Cabinet members, development partners—multilateral, bilateral and international partners,” Adesina said last week.
Zimbabwe remains in debt distress with an unsustainable Public and Publicly Guaranteed (PPG) external debt overhang amounting to US$14.4bn, as at end December 2021. The country has been unable to meet its debt servicing obligations and has, therefore, been accumulating external debt arrears since 2000, which are now estimated at US$6.6bn as at end December 2021.
It owes the World Bank Group (US$1.4bn), AfDB (US$681m) and the US$344m to the European Investment Bank.
Despite the debt, Zimbabwe has been making token payments quarterly to AfDB and the World Bank. It has also been an active and reliable shareholder of the AfDB paying its subscription in a “very tough environment” and participating in the general capital increase of the bank, Adesina said.
According to the Arrears Clearance and Debt Resolution Strategy document, Zimbabwe has been exploring traditional debt relief options, including the Highly Indebted Poor Country (HIPC) Initiative, which provides maximum debt relief for beneficiary countries.
If the window for the HIPC Initiative is available, Zimbabwe is keen to participate in the HIPC Initiative process in order to benefit from maximum debt relief.
This would require a modification or exception granted by IDA’s Executive Board, to the World Bank HIPC Initiative eligibility criteria, for the reclassification of Zimbabwe as an IDA-only country. This will also require IMF’s Board grandfathering of Zimbabwe to the HIPC Initiative, the strategy said.
If the HIPC Initiative is not available, Zimbabwe would use a combination of its own resources and bridge concessional loans from bilateral development partners who are willing to channel their excess resources to support Zimbabwe’s Arrears Clearance, Debt Relief and Restructuring Strategy.
