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Roberta Katunga Senior Business Reporter
ECONOMIC analysts have lauded Government’s commitment towards addressing the $10,8 billion external debt by engaging international financial institutions saying the talks were a positive step towards extinguishing arrears and attracting investment. Finance and Economic Development Minister Patrick Chinamasa on Friday revealed that Government was set to meet multilateral creditors at the next meeting of the IMF and the World Bank (WB) scheduled for October in Lima, Peru where the country’s $10,8 billion arrears will be the main agenda for deliberation at the meetings as the country crafts repayment mechanisms.
He said on the other hand the African Development Bank (AfDB) has committed to come up with a plan to help Zimbabwe settle its arrears including the $601 million the country owes to the regional lender.
Speaking on Government’s commitment to resolve its debt, Zimbabwe National Chamber of Commerce chief executive officer and analyst Mr Chris Mugaga said it was important to settle the debt for the sake of economic growth.
“The major reason why it is difficult for us to access offshore lines of credit, attract investors and come up with an active money market is because of the external debt. It has been hindering economic growth and the International Monetary Fund (IMF) will continue making unnecessary demands hiding behind the debt issue hence the importance of addressing it,” said Mr Mugaga.
Mr Mugaga said Government should make repayment of the debt a priority.
Economist Mr Prosper Chitambara was of the view that settling the debt would give confidence to bilateral and multilateral partners and urged Government to actualise its commitment to action.
He reiterated Mr Mugaga’s sentiments that the external debt had led to the country’s inability to attract additional credit.
“By trying to clear arrears, Government has been crowding out money that should have been used for social investments or other kinds of investment that is why it is important to address the debt issue at once,” said Mr Chitambara.
He said it was now imperative to address issues that include ease of doing business as well as the regulatory and political environment.
“We need to reduce the number of days to register a business and address other issues that have made us to be viewed as an unfavourable investment destination. Once we grow our economy, the debt to GDP ratio will also be reduced.
The only way of increasing the economic growth rate is by attracting investment,” Mr Chitambara said.
Solusi University lecturer and economist Dr Bongani Ngwenya said if successful, AfDB’s assistance in clearing the arrears would go a long way.
He said when it comes to lending, a creditor always assesses the borrower and the risk involved in lending.
“Right now we are heavily in debt as a country hence the risk to creditors is extremely high and that is the reason why they have been reluctant to pour in money to us. Addressing the debt hinges on Zimbabwe’s willingness to cooperate and creating a conducive environment for investors,” said Dr Ngwenya.
He said what the country needed to improve on were foreign direct inflows and to bring down the perceived high risk that the international community is assuming.
“A high level of seriousness as a Government to embrace structural economic changes is needed. We shouldn’t lose focus that AfDB assistance depends on our commitment,” he said.
Buy Zimbabwe chief economist Mr Kipson Gundani added that the ongoing engagements were critical as they would make creditors realise the country’s commitment to clearing the arrears.
He said there was a need to brace for increasing efforts over implementing reforms to get debt forgiveness.
“What needs to be understood is that reforms are liberal and they hinge on the size of Government hence there might be a need to cut the size of the civil service and the other issue is on liberal policies. But the main issue is that engagements are a positive step towards extinguishing arrears,” said Mr Gundani.
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