Financing Zim-Asset post Lima

Zimbabwe is now in good stead to access long-term finance and capital on international money and capital markets.

Zimbabwe should take full advantage of its US$10 billion arrears repayment deal which was endorsed by international multi-lateral financial institutions and nations on the sidelines of the World Bank/IMF Annual General Meeting in Lima, Peru recently.
For now, I will not get into the merits or demerits of this deal, though I confess my misgivings on it.
As I understand it, the arrangement involves Zimbabwe settling the arrears in full by April 30, 2016.
Government is also to negotiate with all these creditors on how best to settle the balance over time.
Zimbabwe is now in good stead to access long-term finance and capital on international money and capital markets.
I therefore propose the following:
* The US$600 million due to the African Development Bank be paid off from the promised grant of the same amount or greater, once the board of that financial institution approves.
This is much akin to a write-off of the arrears, which would be most appreciated and should be accepted forthwith.
* The arrears of about US$100 million, being the smallest component of the total, should be settled using the Special Drawing Rights held by the IMF.
* The biggest chunk of the arrears of US$1,1 billion — largely due to the World Bank, should be settled through reasonably priced long-term borrowings, preferably secured on a bilateral basis from Paris Club members or other Western lenders where possible.
In my view, non-Western lenders should only be approached in the event of there being a shortfall.
Since Zimbabwe’s inability to timeously repay loans was worsened by illegal economic sanctions, our main debt resolution strategy should be to seek debt forgiveness from these Western international creditors.
If this fully justifiable stance is adopted, this should then guide us in all our negotiations on matters relating to our debt balance due to the Westerners.
In the meantime, the ill-advised recommendation by the inclusive Government for debt resolution under the HIPC scenario should be discarded.
That approach was grounded in false pretences on at least two counts.
First, Zimbabwe is not poor given the scale of its God-given natural resources, which are worth trillions of US dollars when exploited.
Second, Zimbabwe is not highly indebted at US$10 billion, if viewed in the context of these resources.
We can be guided by the precedent set by our twin sister nation, Zambia, which, in the early years of the new millennium, enjoyed the benevolence of Western creditors by way of debt forgiveness to the tune of about US$7 billion.
This was in circumstances that were less precarious and not the result of illegal sanctions as in our case.
Once we are done with foreign debt overhang, our focus should be on resolving the long overdue matter of domestic debt and the equally crucial matter of financing Zim-Asset.
My suggestions here are as follows:
* Most mega projects under Zim-Asset should continue to be funded on a bilateral basis by friendly countries from the East — China and Russia already being cases in point.
There is also further scope for such assistance from other nations.
Zimbabwe should angle to tap more into Eastern multi-lateral financial institutions like the Asia Investment and Development Bank, the New Brics Bank, China Development Bank and China Import and Export Bank.
Further, the country can also seek development assistance from the World Bank and African Development Bank.
* We should, in addition, try to secure capital from the institutions mentioned above so as to fund and capacitate domestic institutions, which will, in turn, then act as financing agencies to large businesses and SMEs.
Such domestic institutions should have varying capital bases from say, US$1 billion to a maximum of US$5 billion.
These local financial institutions can then also be converted to financing entities that cover all Zim-Asset clusters as follows:
1. Agribank — The Food Security and Nutrition Cluster predominantly, but also extending to the Value Addition and Beneficiation and Poverty Alleviation and Eradication clusters.
2. Infrastructure Development Bank of Zimbabwe — For the Infrastructure and Utilities Cluster, in the main.
3. Industrial Development Corporation to cover the Value Addition and Beneficiation Cluster, particularly assisting in Special Economic Zones and SMEs, and helping resuscitate collapsed industries.
4. Zimbabwe needs new entities or departments to cater specifically for the financial requirements of mining and tourism, and businesses run by women and youth.
Traditional banks will thus be left to play complementary and supplementary roles across all clusters, specialising in areas of their choice.
Domestic debt needs our immediate attention in light of the progress being made in dealing with foreign debt.
Both the domestic and foreign debt resolution strategies should find prominence and adequate expression in the 2016 National Budget.
Some modes of settling domestic debt include use of Zimbabwe Dollar coins (not notes at this stage), which coins should be at par with bond coins already in circulation or at par with US cents on a one-to-one basis.
These bond coins are popular with the transacting public, contrary to the initial response and expectations.
There are no constraints or impediments whatsoever, in my view, to issuing Zimdollar coins from our Reserve Bank of Zimbabwe vaults where they are busy gathering dust.
We would then phase out the use of foreign coins (predominately Rand coins) which are now a source of confusion, arising from exchange rate dis-symmetry particularly following the massive devaluation of the Rand.
We should also rely more on paper money instruments like Treasury Bills, other Government bonds and stocks, both foreign and local, to now liquidate in full, the existing and potential domestic debt.
This is notwithstanding the fact that issuance of such paper money inevitably leads to new and increased domestic and foreign debt.
The solution to this challenge is to structure such new debt appropriately, and judiciously manage it going forward by mainly using the very same monetary instruments and paper.
Issues to do with Civil Service rationalisation, Gross Domestic Product recompilation and debasing, improving the National Budget Framework and revamping the Tax system should all take centre stage in the emerging new dispensation.
It is indeed with a sense of great achievement and pride that one notes how home-initiated Zim-Asset seems to have gained recognition at regional, continental and global level.
Initiatives like the Sadc 10-year Industrial Development Programme, the African Union’s Agenda 2063 and the United Nations’ Sustainable Development Goals to 2030 are in sync with Zim-Asset.
It is, therefore, incumbent upon all patriotic Zimbabweans to ensure Zim-Asset succeeds