ZIMBABWE will not access the US$600 million African Development Bank (AfDB) bridge facility to clear its arrears this year as it will miss the December 31 deadline after the country was left out of the regional bank’s agenda during Wednesday’s board meetings, it has been established.
BY BERNARD MPOFU
This means Harare will now have to make a new arrangement to secure the money by pushing for a roll-over of the facility. Zimbabwe owes AfDB US$600 million in arrears.
Before the meeting, Zimbabwe was frantically scrambling to secure US$600 million from the regional bank to clear its arrears and avert a catastrophic setback in efforts to rescue the sinking economy.
The restoration of relations with international financial institutions (IFIs) and repayment of bilateral loans is the only way for the cash-strapped government to access long-term concessionary funding to halt the current economic implosion.
Before successfully clearing its arrears to the International Monetary Fund (IMF) recently, Zimbabwe owed three IFIs who enjoy preferred creditor status US$1,8 billion. The country had been in arrears since the turn of the millennium, disqualifying it from accessing cheap funding.
Sources within the IFIs said this could frustrate the country’s arrears clearance plan agreed in Lima, Peru, in October 2015.
Questions sent to the Abidjan-headquartered bank on Wednesday were not responded to at the time of going to print, while central bank governor John Mangudya would not be drawn into commenting.
British ambassador to Zimbabwe Catriona Laing also confirmed that Zimbabwe had been left out. Britain is playing a crucial role in the country’s re-engagement with IFIs and the international community.
“The bigger challenge is around the debt they owe to the AfDB and the World Bank, which is much larger and for which there isn’t a similar accounting mechanism. The government is trying to raise the funding to do this. That means that they are involved in discussions with private sector banks to secure loans to pay off that debt,” Laing said in an interview with the Zimbabwe Independent this week. “No government wants to take more debt but if it is seen as necessary in order to eventually normalise their relations with the international financial institutions and through that return to normal international relations. It is a price therefore they appear to be willing to pay. But it is difficult. Zimbabwe is not an easy country to lend money to. There is high political risk, there is high economic risk.”
As reported by the Independent last month, documents provided by senior officials in the Ministry of Finance showed that government had written to AfDB a new proposal on how to revive the Lima Plan and how to specifically access the bridge finance. Realising that it is no longer possible to get the money, Zimbabwe is making an unusual proposal to have the facility rolled over to next year so that it can first put its house in order by meeting the reform benchmarks which are a prerequisite for any funding from the regional bank.
Zimbabwe must adopt a raft of reforms, which include reducing the fiscal deficit to sustainable levels through the alignment and re-organisation of the public service sector, to secure funding.
Currently, the government wage bill accounts for 91% of total revenue. Chinamasa’s bid to reduce the wage bill announced in his mid-term fiscal policy review statement in September was blocked by cabinet.
Government is also expected to strengthen financial sector stability and confidence as well as accelerate the ease of doing business reforms under the Rapid Results Approach to enhance investor confidence. Overhauling state-owned enterprises and parastatals is also critical for the re-engagement process.