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Senior Business Reporter
Finance and Economic Development Minister, Professor Mthuli Ncube has said the implementation of an Arrears Clearance, Debt Relief and Debt Restructuring Strategy is the only path for the country to access new external financing required for post Covid-19 recovery and achieving the economic development agenda.
Zimbabwe, according to the Arrears Clearance, Debt Relief and Debt Restructuring Strategy document is ready and geared for private sector-led inclusive economic growth.
It said the arrears clearance and eventual access to new financing will provide momentum for economic reforms and private sector investment for the country to attain Vision 2030 goals.
In a comprehensive strategic document, Minister Ncube said for the arrears restructuring strategy to succeed, the country will need strategic partners and champions among the international community.
“The need for strong, broad and comprehensive re-engagement with development partners cannot be over-emphasised.
“For the Arrears Clearance, Debt Relief and Restructuring Strategy to succeed, Zimbabwe will need strategic partners and champions among the international community,” reads part of the document.
Minister Ncube said the country’s post Covid-19 pandemic recovery requires access to new resources to invest in healthcare, education, key infrastructure, climate change adaptation and mitigation, safety nets and social protection.
“The Covid-19 pandemic has not spared any nation and has had devastating impacts on Zimbabwe, worsening the position of an already debt distressed economy. Zimbabwe, therefore, needs to also benefit from the global efforts and measures that are aimed at bringing debt relief and availing resources to mitigate the impact of Covid-19 pandemic to low-income countries.”
According to the document, the urgent conclusion of a debt resolution strategy is critical in regaining access to concessional financing from both multilateral and bilateral development partners.
The clearance of the arrears to the International Financial Institutions (IFIs) and Paris Club requires a comprehensive, well-coordinated approach, including strong support from all creditors, it said.
In a show of commitment to clear the debt and in line with the Government’s re-engagement commitment, token payments to the International Financial Institutions amounting to US$1,6 million per quarter, were resumed in March 2021.
Token payments amounting to US$100 000 per quarter are being made to each of the 16 Paris Club bilateral creditor beginning in September 2021 – a total of US$1,6 million per quarter.
“Arrears remain a major challenge to the economy, making up over 77 percent of total external debt. Almost all external debt owed to multilateral development financial institutions (MDBs) is now in arrears, (World Bank Group, US$1,4 billion or 88 per cent, African Development Bank, US$681 million or 95 percent and European Investment Bank, US$344 million or 95 per cent).”
The external debt overhang is weighing down heavily on the country’s development needs and will continue to negatively impact on the country’s ability to meet the SDGs targets, especially in health, education, social protection and bring down the levels of extreme poverty.
“The lack of access to international financial resources to finance Zimbabwe’s economic recovery from the Covid-19 pandemic and NDS1 priority projects and programmes will continue to affect the country’s capacity to achieve its inclusive economic development goals, especially infrastructure investments, and climate change mitigation and resilience.
“The continuing accumulation of arrears is also seriously undermining the country’s credit rating and is severely compromising the country’s ability to attract foreign direct investment, as well as to mobilise direct budget and balance of payments support.
” Zimbabwe is also currently losing out on opportunities to access concessional facilities from the International Financial Institutions (IFIs) such as the World Bank’s IDA, AfDB’s ADF and IMF’s Extended Credit Facility (ECF),” the report further says.
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