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Lloyd Gumbo Harare Bureau
THE government will use its funding facilities from regional and international financial institutions to clear Zimbabwe’s foreign debt, Finance and Economic Development Minister Patrick Chinamasa has said.
He told MPs who attended the pre-budget seminar in Victoria Falls recently that Zimbabwe owed the African Development Bank about $600 million, the World Bank over $1 billion and the International Monetary Fund about $120 million.
Minister Chinamasa said the government would engage “friendly countries” to chip in and help the country clear the over $1 billion debt to the World Bank.
Clearing the outstanding debt will unlock further lines of credit.
He said the debt clearance strategy was endorsed by creditors on the sidelines of the 2015 World Bank and International Monetary Fund annual meeting in Lima, Peru last month.
The government pledged to settle the arrears by April next year.
“Zimbabwe owes $10, 8 billion to external creditors and of that debt, $6, 8 billion is owed to external creditors by the government while $4 billion is owed to external creditors by the private sector,” said Minister Chinamasa.
“Fortunately the private sector is servicing its $4 billion debt. So there is no problem and I’ve been asking external financial institutions ‘why are you not continuing to offer credit to the private sector since they’ve a track record of servicing their loans’? So the problem is with the government debt.”
He said while Zimbabwe was a member of the World Bank, IMF and AfDB, it could not access loans from the three institutions because of the debt.
Minister Chinamasa said this was because there are rules that prohibit financial institutions from lending to countries that are in arrears and failing to settle their debts.
He said this inspired the government to re-engage creditors through a committee that was chaired by Reserve Bank of Zimbabwe Governor, John Mangudya, with the country’s debt clearance strategy.
“Our strategy essentially, is that we get money from African Export-Import Bank (Afreximbank) in Cairo to clear the arrears and simultaneously, we should be able to get new money being made to us by AfDB
“We’re also going to use our Special Drawing Rights with the IMF to clear the debt which is due to the IMF. And we’re going to use one or two friendly countries to help us clear the debt to the World Bank.
“That’s the strategy we took to LIMA. All those who spoke from the UK representative, to the United States representative, Australia, Germany, France they all supported and asked that the financial institutions should help Zimbabwe recover from its current economic situation.
“The support was overwhelming and it also indicted to us that the European Union is warming up to us. We should never remain in isolation. Isolation isn’t in our interest. Isolation was just the price we had to pay for the land reform. And I’ve been telling them unapologetically that we had to do it. And when now you engage them, they all accept the land reform programme,” said Minister Chinamasa.
MPs hailed Minister Chinamasa for his commitment to re-engage creditors.
Online Reporter