PHILLIMON MHLANGA
Capital-starved Zimbabwe will next week vigorously push for a deal with key multi-lateral and bilateral creditors to restructure a total debt stock amounting to $2,8 billion when the country sends a delegation to the International Monetary Fund annual meeting, which will be held in Bali Indonesia.
Confirming the latest development, the new Finance and Economic Development Minister, Mthuli Ncube said the proposed deal for new payment arrangements remain the only feasible option for the two parties.
International creditors have been keeping their purse strings tied, instead indicating that Zimbabwe, which is in debt distress and large financing gaps, had to first settle overdue financial obligations. The proposed debt restructuring deal, Ncube said would be a big step towards enabling Zimbabwe to access fresh offshore capital for the country’s economic revival.
In October 2015, Zimbabwe and multilateral lenders, the IMF, the World Bank and the African Development Bank agreed on arrears clearance programme in Lima, Peru.
In terms of that plan, endorsed by the international creditors, Zimbabwe was to settle $110 million owed to IMF, $601 million to AfDB and $1,2 billion to the WB.
Clearance of these arrears, totalling $1,8 billion, was expected to be completed by June 2016. But, only settlement to the IMF was achieved.
Ncube said: “Treasury is accelerating the process of reengagement with international partners and creditors in order to clear arrears on external debt.
He said negotiations had been initiated already between Zimbabwe and the Paris Club creditors, an informal group of official creditors, mostly industrialised countries, including United Kingdom, German, France, Switzerland, Sweden, Japan and Italy. He indicated that the two parties would hammer out the remaining details at the World Bank (WB)/ International Monetary Fund (IMF) annual meeting to be held in Bali, Indonesia next week from Wednesday to Sunday.
Already, the United Kingdom through its former ambassador to Zimbabwe, Catriona Laing, has said it would put in a good word for the country at the meeting.
Ncube, central bank gover nor John Mangudya and other senior ministry of Finance and Reserve Bank of Zimbabwe officials are expected to attend the IMF and WB Spring meetings next week.
“Treasury is engaging key various international creditors with a view to restructuring $2,8 billion owed to them,” Ncube said this week.
“Such debt resolution will help restore the international credit standing of Zimbabwe, resulting in improved access to new external credit lines and investment flows. Experts from the IMF said the Paris Club normally requires countries that have been battling to meet obligations from their depleted coffers, Zimbabwe included, to have an active Fund-supported programme in order to qualify for a rescheduling agreement.
This appears to suggest that Zimbabwe remained disqualified for debt relief from the Paris Club countries.
Other international creditors have also snubbed concerted pleas for financial rescue package by the Zimbabwe government, instead saying it would only offer technical support in arrears that represented major risk to the implementation of the government’s macroeconomic stabilisation programme.
In light of this, most donor and financial institutions take a cue from the IMF which is considered an international financial Commissioner of Oaths.
While Zimbabwe was skipped because of an absence of an IMF programme as well as sour international relations, its neighbours Zambia and Mozambique, benefitted from debt rescheduling and cancellations under the Paris Club arrangement.
Zimbabwe’s external debt stock increased to $7,4 billion as at end of August 2018 from $6,1 billion in 2009 when the country ditched its own currency due to hyperinflationary pressures. The expansion of the country’s foreign debt was caused by punitive interest on arrears.
Zimbabwe’s external debt servicing problems began when the country started defaulting on its external debt in 1999. Since then, the country has been shut out of international capital markets.
