Chinamasa faces a herculean task

FINANCE minister Patrick Chinamasa faces a herculean task to garner support for full re-engagement with multilateral creditors as Treasury seeks to find a lasting solution to tackle the country’s US$8,4 billion debt overhang and arrears, while restoring lines of credit against a backdrop of a shrinking fiscal space.

Bernard Mpofu

Chinamasa and Reserve Bank of Zimbabwe (RBZ) governor John Mangudya next month in Lima, Peru, where they are expected to negotiate a plan to settle arrears to multilateral lenders which include the International Monetary, the World Bank and the African Development Bank.

Government will soon dispatch a delegation to Paris, Brussels and Berlin to discuss its debt and arrears situation with the Paris Club — an informal group of creditor nations whose objective is to find workable solutions to payment problems faced by debtor nations — and map the way forward.

The African Development Bank has set aside a grant to help Zimbabwe clears its arrears.

Official figures show that Zimbabwe owes bilateral creditors US$3,5 billion, including arrears, Paris Club US$2,8 billion, non-Paris Club US$709 million, multilateral creditors US$587 million, while the RBZ owes US$87 million.
Last week, Chinamasa told delegates attending a roundtable discussion in Harare on the country’s financial crisis that debt remained an albatross on government.

“So, the reality treasury faces is that we owe money to South Korea, Japan, China, India, Kuwait, every country in Europe, Canada, Australia as well as the European Investment Bank, African Development Bank and the IMF. That is reality,” he said.

Outstanding arrears accrued since the turn of the millennium have made Zimbabwe ineligible to access long-term capital from Bretton Woods institutions, forcing government to rely on development partners and meagre funds from the fiscus to fund capital projects.

Treasury figures show that public sector spending accounts for 80% of total revenue.

Experts say an underperforming economy, which saw government lowering economic growth rates to a modest to 1,5% from 3,2% also piles pressure on treasury.

Last June, Zimbabwe undertook an IMF staff-monitored programme (SMP), an informal and flexible instrument for dialogue between the Fund staff and a member country on its economic policies but does not entail financial support.

The SMP seeks to increase Zimbabwe’s capacity to repay its debts arrears by strengthening its external position and to demonstrate that the country can implement policies that could eventually justify a financial programme with the IMF.

A visiting IMF mission, which was in the country between August 31 and September 11 and led by Domenico Fanizza, said while the country had made efforts to adhere to the 15-month SMP approved by the IMF in November 2014, more reforms are still required to increase capacity to clear arrears.

“The authorities’ efforts to discuss their strategy on resolving the external arrears with multilateral creditors at the dedicated stakeholders meeting in October will be instrumental in highlighting the authorities’ reform agenda on the path toward normalising relations with the international community,” the IMF team said after concluding the mission.

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