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ZIMBABWE is slowly but surely getting its economic fundamentals right and the country is poised for a turnaround in the not so distant future. Finance and Economic Development Minister Patrick Chinamasa’s engagements with global multilateral financial institutions are beginning to bear fruit as evidenced by the positive vibes emanating from the World Bank, International Monetary Fund and the African Development Bank.
Zimbabwe owes billions to these global lenders but the country has shown good faith and a commitment to honouring its debt by making token payments and agreeing to meet some of their prescriptions. In response, the Bretton Woods institutions have been warming up to Zimbabwe and assisting it on ways to access loans and get the economy back on track.
The country made a major breakthrough on Tuesday when at the end of its engagements with the AfDB, the continental bank set aside a grant to help Zimbabwe clear its arrears on its books, the IMF and World Bank, putting Harare in good stead to push for debt relief with multilateral and other creditors.
This is significant because in the long run, the debt relief will pave way for fresh loans and an injection of capital the country badly needs for infrastructural development and budgetary support. Speaking at a media briefing in Harare on Tuesday, AfDB director Sibry Tapsoba, said the financial institution had set aside some funds to assist Zimbabwe to clear its arrears.
He said the amount was yet to be agreed as it required approval from the Abidjan-headquartered AfDB. “The total amount of arrears for Zimbabwe to AfDB is $601 million and the resources that we are putting aside will clear the AfDB arrears, but we must clear the arrears of IMF and the World Bank,” Tapsoba said.
This means that Zimbabwe will clear its debt to the AfDB by the end of this year and this will help the country reduce its loans with foreign lenders and pave way for fresh financing streams to rejuvenate the economy.
The regional multilateral institution has also extended a grant of $5 million towards Zimbabwe’s membership of the African Trade Insurance (ATI). Zimbabwe has pledged to contribute counterpart funds of $5 million, which will enable the country to be a subscriber- shareholder to the ATI.
The country is saddled with close to $10 billion debt, part of which is owed to the World Bank and the International Monetary Fund. In recent months Zimbabwe has been seeking to expedite arrears clearance with these institutions as a first step to broader re-engagement. A 12-member AfDB delegation is in the country to discuss Zimbabwe’s strategies to clear its debt arrears to the three multilateral financial institutions.
Minister Chinamasa said the AfDB had made their proposal to fund the country’s arrears clearance with them after being briefed on the government’s proposed strategies to deal with the arrears, and the on-going reforms under the IMF’s Staff Monitored Programme. “The African Development Bank has set aside some funds to assist Zimbabwe in clearing the arrears. The amount is yet to be determined by their board,” he said.
According to Minister Chinamasa, the AfDB funds would be available for drawdown up to the end of 2016, so Zimbabwe has to expedite the process. He said Zimbabwe would be looking to clear the AfDB arrears by end of this year.
“And they’ve assured us that those funds, which have been set aside to assist Zimbabwe in clearing its arrears will be available to us up to end of December 2016, otherwise if we don’t utilise them between now and December next year the funds will disappear, and they (AfDB) will need to go to the market again to mobilise new resources, something that would take more time. So we must make every effort to ensure that we’re able to utilise those funds by end of December next year. In fact our hope is that if our strategy is accepted we hope that we should clear the arrears to the AfDB by December this year . . . There are also other strategies that we’re going to employ to make sure that this happens by December 2015,” said Minister Chinamasa.
We applaud the current initiatives and others that are in the pipeline to ensure the country accesses cheap loans to breathe new life into the economy. As part of the government strategy to clear its debt, a team has been dispatched to key European capitals to present is plan on dealing with arrears to the Paris Club creditors ahead of the Bretton Woods institutions’ annual meetings scheduled for Lima, Peru next month and we hope it succeeds in convincing creditors on Zimbabwe’s commitment to reforms and servicing its debts.
The country is making great strides to attract investment and in his State of the Nation Address last month, President Robert Mugabe outlined a number of measures tailored to make the life of Foreign Direct Investors easier. Zimbabwe has amended its labour laws and is in the process of tweaking the Companies Act to smooth the way for foreign investors. It has also embarked on a civil service audit to reduce the government wage bill. This is a government showing a real and serious commitment to turning around its economy.
derick.khumalo