IMF considers bridging finance for Zim

AS details of plans to clear Zimbabwe’s US$1,8 billion arrears to the IMF, World Bank and African Development Bank by mid-next year are being worked out, it is emerging that a viable option under consideration is to extend bridging finance to settle the obligations.
Already, Government has indicated it is considering using the US$100 million worth of Special Drawing Rights – availed to the country by the IMF in September 2009 – and currently held in escrow, to amortise part of the US$110 million owed to that international financier.
Africa-focused lender, the Abidjan-based AfDB also intimated after meetings in Harare on September 15, 2015 that it was entertaining the idea of issuing a grant to clear Zimbabwe’s US$600 million arrears due to the lender.
The biggest chunk, however, owed to the three key international finance institutions is the $1,15 billion that is owed to the World Bank, an amount that cannot be raised on the local market. While fielding questions at a press conference organised at the sidelines of the IMF and World Bank annual meetings in Lima Peru on October 9, 2015, IMF African director Ms Antoinette Sayeh said the strategy presented by Zimbabwe to the international finance institutions and bilateral creditors is “feasible”.
She noted that if the strategy is implemented as planned, it will be possible for the country to unlock fresh sources of capital from the key lenders by next year.
The country has undergone two IMF-sponsored staff-monitored programmes and a third one is set to begin in January.
It is this track record of maintaining sound fiscal policies that makes creditors optimistic that the country’s arrears clearance strategy will come to fruition.
“As you know, Zimbabwe has significant arrears to the international financial institutions and to the international community as a whole that makes additional financing to Zimbabwe impossible.
“So it is a priority for the Zimbabwean authorities to, as quickly as possible, try to clear the arrears to international financial institutions as a first step in being able to access new financing that is so desperately needed for Zimbabwe to make progress on economic and social issues . . .
“Of course, there is the discussion of a bridge financing that would be available to clear the arrears to the World Bank and the African Development Bank and possible use of Zimbabwe’s SDR holdings to pay the arrears to the IMF.
“Details are still being worked on, but all in all, these options were looked upon favourably in the meeting we had yesterday and were seen as feasible to put in place,” said Ms Sayeh.
Zim-Asset, the country’s economic blueprint through to 2018, is facing funding challenges that are limiting the programme’s capacity.
But renewed funding would add oomph to economic growth prospects and there is a real possibility that Zimbabwe could get that support in 2016.
“The third review will take place in the first quarter of 2016.
“And if performance continues to be very good under that programme, our hope is that the process of clearing the arrears proceeds and that it could be possible by the middle of next year to see Zimbabwe clear its arrears to all of the IFIs and thereby being able to benefit from new financing from them,” said Ms Sayeh.
Although the plan is mainly focussed on clearing arrears to the IMF, World Bank and AfDB, additional measures are being put in place to engage bilateral creditors.
Statistics show that Zimbabwe owes Paris Club creditors such as Austria, Belgium, Finland, France, German, Italy, Japan, Netherlands, Norway, Spain, Sweden, Switzerland, the United Kingdom and the United States of America a combined US$3 billion.
The Paris Club, established in 1956, is an informal group of officials from creditor countries that ostensibly try to find solutions for debtor countries.
It usually handles public claims owed by governments of debtor countries and by the private sector, guaranteed by the public sector to Paris Club members.
There are also non-Paris club states like China, Kuwait and South Africa to which the country is indebted to the sum of US$700 million.
Government continues to make token payments to show its commitment to repaying debt obligations.
There are monthly payments of US$150 000 to service arrears to the IMF, including quarterly payments of US$900 000 and US$500 000 to the World Bank and AfDB respectively.
Government is not only pinning its hopes on resources that might be unlocked from international lenders, but it is also priming itself to attract FDI.
Plans are already underway to make it easy for both domestic and international investors to do business in Zimbabwe.
Additional reforms to the One-Stop-Shop Investment Centre, launched by President Mugabe in December 2010, are in the pipeline.
And the Zimbabwe Investment Authority is seized with amending the Companies Act to simplify registering a business.
The amendments are expected to be passed by February 2016.
The turnaround time of getting an investment licence has since been slashed from 30 days to five, and they will be further reduced to two.
ZIA will revise and automate the processes of name search, company registration and annual account filing.