The government, taking its begging bowl to Russia and Malaysia in search of a bailout to halt economic implosion, is making frantic last-minute efforts to mobilise US$1,2 billion out of the US$1,8 billion required to settle arrears to international financial institutions (IFIs) as the Lima Plan falls into disarray.
By Bernard Mpofu
Time is running out for the debt-ridden government to settle its arrears to preferred international financiers — World Bank, International Monetary Fund (IMF) and the African Development Bank (AfDB) — in order to access AfDB bridge financing.
It has since emerged that Zimbabwe’s arrears clearance strategy, known as the Lima Plan, is now dead in the water due to a powerful lobby against it on the domestic and international fronts and failure by government to implement far-reaching reforms.
However, the IMF is understood to be working on a new programme for Zimbabwe.
Sources said this comes at a time the IMF still has questions on the introduction of bond notes set to be introduced later this month. It is understood the government could also be considering an alternative to the arrears clearance plan.
Government sources revealed Reserve Bank of Zimbabwe governor John Mangudya has taken the begging bowl to Russia and Malaysia in a desperate bid to seek funding for sectors such as agriculture.
Contacted by the Zimbabwe Independent, Mangudya confirmed that he visited the two countries after the just-ended IMF annual meetings in Washington DC.
“I went to Malaysia to discuss the settlement of an old debt that occurred during the period of the Bilateral Payments Arrangement between Malaysia and Zimbabwe signed in 1991 and operational in 2000.
“In Russia I was exploring the possibility of importing agricultural inputs,” Mangudya said in an interview.
IMF country representative Christian Beddies told the Independent that Zimbabwe was still committed to clearing its arrears, but would not disclose the timelines.
He said the country also requires more economic reforms before fully engaging with the international community.
“As we understand, the Zimbabwean authorities still plan to clear the arrears to the IFIs within a determined period of time. The authorities are working on finding new financing, notably to be able to pay the arrears to the World Bank (US$1,2 billion out of a total of US$1,8 billion),” Beddies said.
“At the same time, they are working on moving forward crucial economic reforms, so that they ensure the financing and adjustment combination needed to tackle Zimbabwe’s serious economic difficulties.”
He added that the country requires “credible” economic reforms before it can fully re-engage with the international community.
“For Zimbabwe to qualify for a financial programme, the authorities need to come up with a credible reform programme that has the support of all the stakeholders, especially at the domestic level. These reforms should meaningfully address the structural challenges that have been hindering economic growth and exacerbating the existing fiscal and external vulnerabilities.
“The support of the international community will be equally crucial in providing the financing for accompanying these reforms,” he said.
In April last year, government launched a joint exercise with preferred creditors 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 International Development Association (IDA) and AfDB arrears (US$260million 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.
Failure to settle the arrears by December 31 will sound the death knell on the ambitious Lima Plan first proposed in Lima last October.
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.