Zim seeks IMF support to clear IFIs arrears

NDAMU SANDU

Zimbabwe is eyeing an IMF-supervised economic reform programme as it paves the way for the clearance of arrears to three international financial institutions (IFIs) in a bid to normalise relations with its creditors.

Finance and Economic Development minister Mthuli Ncube told journalists at a press conference on the sidelines of the IMF/World Bank annual meetings that Zimbabwe has engaged the two IFIs to resolve the debt crisis before it deals with the Paris club creditors.

Zimbabwe owes World Bank Group US$1.4bn, AfDB US$681m and the US$344m to the European Investment Bank (EIB). It also owes the 17 Paris Club members.

“IMF staff will be in Zimbabwe in December for the Article IV visit. As we go into Q1, Q2, we will have discussions on a staff monitored programme [SMP] which will clear us to access resources from a sponsor who will help us with bridge funding to clear the arrears of the World Bank, AfDB and the EIB,” Ncube said.

An SMP is an informal agreement between country national authorities and IMF staff to monitor the authorities’ economic programme.

An SMP is used in cases where a country is not yet able to implement a normal IMF-supported programme, for reasons that may include limited institutional capacity, domestic fragility or instability, or absence of financing assurances.

SMPs can help these member countries establish or re-establish a track record of policy implementation that can pave a way for an IMF financial arrangement or for the resumption of a financial arrangement that has gone off-track, and in some cases, for repeat use of emergency assistance.

Zimbabwe has an external debt of over US$14.4bn which has prevented the Southern African country from accessing cheap lines of credit from the IFIs.

It has appointed AfDB president Akinwumi Adesina as the champion to lead the arrears clearance process. The process has received support from the United States which has urged Zimbabwe to undertake economic and political reforms.

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 during his visit to Zimbabwe in July where he met President Emmerson Mnangagwa, government officials, business leaders and western embassies.

Zimbabwe remains in debt distress with an unsustainable Public and Publicly Guaranteed external debt overhang amounting to US$14.4bn, as at end December 2021. It 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.

Despite the debt, Zimbabwe has been making token payments quarterly to AfDB, the World Bank, EIB and the Paris Club members.

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.