Online Reporter
Wallace Ruzvidzo, Zimpapers Reporter
Zimbabwe is deploying a multi-pronged approach to service its debt, with Government considering leveraging on the country’s vast natural resources, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube has said.
The country is at a pivotal moment in its economic journey, with the Second Republic working diligently to clear the US$21 billion obligations.
This debt, which includes US$12,3 billion in external obligations, has posed significant challenges to the country’s economic growth and development, thus, the Second Republic initiated the high-level arrears clearance and debt resolution platform.
Responding to questions posed by Zimpapers, Prof Ncube said Zimbabwe was considering both bridge financing and harnessing its natural resources to ensure successful arrears clearance and debt resolution.
“Remember, this path that we have chosen is a path that allows us to clear the World Bank and the AfDB arrears first, which then requires a Staff Monitored Programme, after which, when successfully completed, then you would identify a sponsor who would give us the bridge financing, and then we would clear the arrears.
“But it also requires that the soft windows of the World Bank and the AfDB have what you call a set-aside in terms of resources, which then will be used to refund whoever has given us the sponsorship for arrears clearance for that three-hour bridge.
“It is a very technical process, only takes three hours, and then it’s done. But to get there, it can take you years, although the actual act is a very short act.
“But that is a route we have chosen. Why? Because it just gives us relief in terms of arrears without having to service the debt on those arrears . . . but there are other routes as well, routes that involve servicing these debts through our own resources or structuring the deals using our own, even natural resources for that matter.
“So we also consider those possibilities,” he said.
As Zimbabwe considers all its options, Prof Ncube said the country was however, no longer in the red zone in terms of the debt-to-GDP ratio.
As of last year, the debt-to-GDP ratio stood at 46 percent and is expected to drop to 45 percent by year-end.
“I did mention that this (arrears clearance) still remains, and it is a narrow liquidity issue, as opposed to our previous condition that it was also a debt sustainability issue, because the debt-to-GDP ratio has dropped to the order of 46 percent as of 2024, and by year-end it will be at 45 percent.
“So that means that we really are no longer seen in that red zone light,” he said.
Turning to the impending Staff Monitored Programme (SMP) with the International Monetary Fund (IMF), the Finance Minister said a series of engagements had been convened and these had culminated in the need for Zimbabwe to employ economic reforms.
These reforms would be implemented by year-end, he said.
“Now, coming to the issue of SMP as a pathway to arrears clearance, we are still in discussions with the IMF regarding the Staff Monitored Programme.
“We haven’t agreed as yet, but we have made considerable progress.
“We have agreed to work on certain fine-tunings in terms of reforms as we move forward, and we think that these reforms should be done in the next six months, but we continue to engage the IMF.
“It then allows us to move to phase two, which is to deal with the Paris Club debt and also be able to negotiate any removal of penalties or excess interest and all that, as well as extend the maturity of that debt,” said Prof Ncube.
Coming to the current American tariffs issue, the Minister said Zimbabwe was at the negotiating table with the US.
Zimbabwe is under an 18 percent tariff on all its exports to the US and, President Mnangagwa responded by removing all tariffs on US goods entering the country as a show of goodwill.
“Our proposal for no tariffs is no tariffs during the negotiation period.
“This is to show goodwill, during the negotiation period, no tariffs.
“But then obviously, we hope that we will be successful in the negotiations, something that is more palatable for both countries.
“If we are, then we have a new tariff regime where there will be reciprocity between the two countries,” he said.
Prof Ncube said the current negotiations were also an opportunity for stronger engagements between Harare and Washington to ultimately improve their trade relations.
“So we are in that period now of negotiations . . . we already have some proposals that we will put across to the US authorities to consider, which we believe will win-win for us.
“But also, we will put these proposals in a very positive way, in a way that will allow us now to explore markets for other products that we are exporting to the Far East, Middle East, to Europe, but not to the US.
“Let us explore markets in the US for these products as well, and also vice versa,” he said.
