World Bank ditches Zim

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Finance minister Patrick Chinamasa (left) talks to Reserve Bank of Zimbabwe governor John

DESPITE recent indications that the World Bank was considering giving Zimbabwe US$300 million to settle part of its arrears to the multilateral lender, latest information shows that the plan has been thwarted due to mounting local and international pressure against the country’s ambitious arrears clearance strategy.

By Bernard Mpofu

An International Development Association (IDA) Turnaround Eligibility Note for the Republic of Zimbabwe dated July 27 revealed that the World Bank was considering providing assistance to the debt ridden country to settle its arrears.

The report showed that Zimbabwe was on the cusp of accessing exceptional support under the IDA 17 Turnaround Regime (Tar). IDA is a unit of the World Bank Group which fights poverty by giving interest-free loans to poor countries.

In April last year, government launched a joint exercise with preferred creditors — the World Bank, International Monetary Fund (IMF) and the African Development Bank (AfDB) — to explore options to clear US$1,8 billion in arrears.

This plan was presented last October in Lima, Peru, and was amended in May 2016 to include repayment of IMF arrears (US$120 million) using Zimbabwe’s Special Drawing Rights resources at the fund; repayment of International Bank for Reconstruction and Development (IBRD) arrears (US$896 million) using a term facility syndicated by the African Export and Import Bank and Lazard Frères; and repayment of IDA and AfDB arrears (US$260 and US$601 million respectively) with a bridging facility from Afreximbank to be financed from future IDA development policy operation and AfDB’s transitional support facility.

The failure of the World Bank plan to help the debt-ridden nation has practically led to the collapse of Zimbabwe’s US$1,8 billion arrears clearance strategy first proposed in Lima, last October.

This was triggered by resistance to the plan by opposition groups, civil society organisations, western diplomats as well as the United States, resulting in the crumbling of the Lima plan.

“While there was a strong lobby in Zimbabwe on the plan, decisive pressure was reportedly exerted by the Treasury Department in Washington DC which questions government commitment to reforms,” a diplomatic source said.

The World Bank yesterday said it was ready to work with Zimbabwe once it settles its arrears.

“The Zimbabwe Turnaround Eligibility Assessment Note that was leaked to some outlets is an unofficial draft document that has not been approved by the Bank,” said the multilateral lender in a statement.

“The World Bank will only resume direct lending to Zimbabwe when the issue of arrears is resolved. This approach is standard to all International Financial Institutions. Upon arrears clearance, Zimbabwe would be eligible as a borrowing member of the Bank to a broad range of financing instruments.”

This comes amid reports Lazard, which had initially committed to assist Zimbabwe clear its arrears, is no longer providing a bailout package but will provide financial advice following strong resistance in Washington DC the British Parliament.

Leader of the Scottish Conservatives Annabel Goldie said Zimbabwe needs more reforms before it can fully engage with the United Kingdom.

“On the general front, in relation to Zimbabwe’s indebtedness to the World Bank, the UK is party to that organisation and we have made it clear that the indebtedness must be cleared,” said Goldie.

“We have made it clear that there has to be progress on the very type of reforms to which I alluded to earlier. We are endeavouring to support the people of Zimbabwe, who are vulnerable and in a fragile condition.”

Meanwhile, time is running out for the debt-ridden government to settle its US$1,8 billion arrears to preferred international financiers — World Bank, IMF and AfDB — in order to access AfDB bridge financing for distressed countries like Somalia, Sudan and Zimbabwe.

The country’s debt overhang at US$10,8 billion continues to be a major impediment to its re-engagement with the international community and limits access to concessional funding.

According to an AfDB internal memo titled Zimbabwe Processing of Debt Arrears Clearance Information Note for July 2016: The African Development Fund-13 Report, the regional bank’s deputies agreed to ring-fence Transition Support Facility Pillar II resources for arrears clearance of Somalia, Sudan and Zimbabwe on a first come, first served basis.

This means should Zimbabwe, which has already missed its June 2016 deadline, fail to meet its commitments and fail to repay arrears, the window could be closed.

Meanwhile, Finance minister Patrick Chinamasa, Reserve Bank of Zimbabwe governor John Mangudya and other government officials are expected to be in Washington from October 3-9 for the IMF annual meetings. Zimbabwe will however not be on the agenda.

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