‘Reforms critical to economic success’

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Finance minister Patrick Chinamasa presenting the 2016 national budget

GOVERNMENT is committed to implementing bold policy reform measures aimed at debt sustainability and improving the socio-economic environment.

FINANCIAL MATTERS by PATRICK CHINAMASA

This is in recognition of the reality that Zimbabwe cannot operate in a vacuum, and hence the acceleration of the re-engagement process with the international financial community.

Finance minister Patrick Chinamasa presenting the 2016 national budget

Finance minister Patrick Chinamasa presenting the 2016 national budget

The policy reform measures which are aimed at the total transformation and development of the Zimbabwean economy were elucidated in the 10-Point Plan by President Robert Mugabe during his State of the Nation Address on August 25 2015.

Within this context, government has made progress with regards to solutions to clear its external debt arrears to both multilateral and bilateral creditors, as a pre-requisite for the country to access new financing in order to meaningfully contribute towards the attainment of accelerated, inclusive and sustained economic growth and poverty eradication.

Therefore to acknowledge the support that government received from the international financial institutions (IFIs) and development partners with regards to extensive deliberations in Lima, Peru, that have yielded an agreed direction in terms of our roadmap for the clearance of debt arrears.

Following the adoption of our strategy to clear external debt arrears by our creditors on the sidelines of the 2015 International Monetary Fund/World Bank Annual Meetings in Lima, the thrust of the 2016 budget is to further consolidate the platform to unlock fresh capital injections into the economy, hence, the theme of this budget, “Building a Conducive Environment that Attracts Foreign Direct Investment”.

This will build on the gains realised so far in the re-engagement process, also under the auspices of our Staff-Monitored Programme (SMP) with the IMF.

The arrears clearance roadmap takes into account the fact that Zimbabwe does not qualify for HIPC and the Multilateral Debt Relief Initiative. The country’s strategy in respect of clearing debt arrears is, therefore, premised on a non-HIPC debt resolution strategy, and supported by a credible economic reform agenda to ensure debt sustainability, unleashing economic transformation and poverty eradication.

The strategy is anchored on the clearance of external debt arrears to the three IFIs, namely the IMF, the World Bank and the African Development Bank (AfDB), as a first step towards seeking debt treatment by the Paris Club and bilateral creditors in the context of a strong economic reform programme. The resolution of external debt arrears to IFIs is to be achieved through a combination of the following strategies that government has put in place:

– Use of domestic resources to clear US$111 million arrears to the IMF;

– Arrangement of bridge finance with regional and international banks to clear US$601 million AfDB; and

– Use of a medium to long-term loan facility to clear US$1,1 billion arrears to the World Bank Group.

It is envisaged that the settlement of external payment arrears to the tune of US$1,8 billion owed to multilateral creditors, would be completed in the first half of 2016.

The debt arrears clearance programme agreed to by the IFIs, and supported by development partners in Lima, will go a long way to unlock new financing for the country. Realisation of the above strategy will also critically depend on the following:

– Successful completion of our current SMP with the IMF which will be reviewed sometime in February 2016;

– Engagement of the Paris Club and other bilateral creditors for debt resolution, on the strength of our performance under the above programme.

However, government is on course towards the successful completion of the third and final review of the SMP with regards to meeting the quantitative as well as the structural benchmarks to December 2015, hence continued implementation of the (government’s economic blue-print) ZimAsset supportive reform agenda to the end of the year and into 2016 will remain critical.

Chinamasa is Finance minister. This is part of his 2016 budget statement in parliament yesterday on the government’s debt and arrears clearance strategy.

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