Bernard Mpofu
Zimbabwe has intensified its negotiations with the Paris Club group of creditors amid concerns over the country’s legacy issues, it has been established.
Zimbabwe is saddled with a $16,9 billion debt, with external debt accounting for nearly $7,4 billion. Out of this, approximately $5,6 billion is in arrears. Government settled $107,9 million arrears owed to the International Monetary Fund in November 2016. What is now outstanding is the clearance of arrears to the World Bank ($1,3 billion), African Development Bank ($680 million) and the European Investment Bank ($308 million).
The Paris Club and non-Paris Club creditors are owed $2,7 billion and $700 million respectively.
The Paris Club is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries. As debtor countries undertake reforms to stabilise and restore their macroeconomic and financial situation, Paris Club creditors provide an appropriate debt treatment.
Paris Club creditors provide debt treatments to debtor countries in the form of rescheduling, which is debt relief by postponement or, in the case of concessional rescheduling, reduction in debt service obligations during a defined period (flow treatment) or as of a set date (stock treatment).
The origin of the Paris Club dates back to 1956 when Argentina agreed to meet its public creditors in Paris. Since then, the Paris Club has reached 433 agreements with 90 different debtor countries. Since 1956, the debt treated in the framework of Paris Club agreements amounts to $583 billion.
According to government sources and officials from international financial institutions, Zimbabwe, which has already committed to settle its arrears with the World Bank and the AfDB has to move mountains in forging a consensus among the Paris Club group after relations with the lenders turned sour at the turn of the millennium when government embarked on the land reform programme to restore colonial legacies.
It is understood that following the World Bank/IMF annual meetings in Bali, Indonesia, Finance minister Mthuli Ncube met members of the Paris Club on the sidelines of the meetings and committed to deepen engagements with the creditors.
Netherlands and Germany particularly, sources said are concerned by government delays in finalising the compensation of white former commercial farmers who lost large vast tracts of land during the agrarian reform. Zimbabwe has a long-standing dispute with the Dutch government with regards to farmers from the country whose Bilateral Investment Promotion and Protection Agreement properties were gazette under the land reform programme.
“Ncube had a bilateral meeting with the Assistant Secretary for Multilateral Affairs, Trade and Development Policies Department in the French Treasury Guillaume Chabert. The French expressed their support and advised that it is critical that all the Paris Club Group of creditors have consensus in order to fulfill the arrears clearance process,” an impeccable source told Business Times.
“Guillaume also told Ncube that there was need to take everyone on board including the United States, United Kingdom, Netherlands among others.”
Ncube could not be reached for comment at the time of going to print.
Last month government’s efforts to resolve long-standing disputes over the land reform programme suffered a major setback last week after a World Bank-affiliated international appeals court – the International Centre for Settlement of Investment Disputes (ICSID) -dismissed Zimbabwe’s application to annul an award granted to a white former commercial farmer by the court.
The ICSID, based in Washington DC, USA, is an international arbitration institution established in 1966 for legal dispute resolution and conciliation between international investors. It is part of, and funded by, the World Bank Group.
In July 2015, the ICSID awarded the Bernhard von Pezold family, of German descent, the return of their property in Manicaland plus their full legal costs and interest, or alternatively the Zimbabwean government should pay the family $195 million in damages.
