ZIMBABWE’S eligibility for a US$600 million African Development Bank bridge (AfDB) facility to settle outstanding arrears to the regional bank is expected to be finalised later this month as the country revives its arrears clearance plan adopted in Lima, Peru, in 2015.
Zimbabwe is frantically scrambling to secure US$600 million from the regional bank to clear its arrears and avert a catastrophic setback in efforts to bail out the sinking economy.
As reported by the Zimbabwe Independent recently, documents provided by senior officials in the Ministry of Finance show that government has written to AfDB making new proposals 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 pre-requisite for any funding from the regional bank. This resulted in government extending its timelines for clearing the arrears from June last year to March this year.
Sources said the AfDB is expected to meet before the end of this month to deliberate on Zimbabwe’s arrears clearance plan.
“This month will be very important for Zimbabwe, the success of its arrears plan hinges on what the AfDB will say when it meets. Once government gets a green light, it will be left with one last hurdle, the World Bank, which it owes US$1,1 billion in arrears,” a government source said.
“The clearance of the arrears will not be an end but a means to an end. Zimbabwe still requires far-reaching reforms to access concessionary funding.”
Before successfully clearing its arrears to the International Monetary Fund (IMF) recently, Zimbabwe owed three international financial institutions (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.
However, the issue of economic, institutional and policy reforms remains a stumbling block for Zimbabwe, which is badly in need of funding to halt economic implosion.
Zimbabwe requires a raft of reforms, which include reducing the fiscal deficit to sustainable levels through the alignment and re-organisation of the public service, to secure funding.
Reserve Bank of Zimbabwe governor John Mangudya in November wrote to Paolo Belli, the World Bank’s acting country director for South Africa, Lesotho, Botswana and Zimbabwe, recommitting to the Lima Plan despite earlier indications that the programme had been sabotaged due to a strong lobby against it.
Reached for comment on the progress of the arrears clearance plan agreed in Peru, Mangudya said all was progressing well, adding that government was waiting for the AfDB board to convene and deliberate on the issue.
“The arrears clearance plan is progressing well. I cannot say when the African Development Bank will meet and discuss our plan because that is now beyond the government of Zimbabwe,” Mangudya said in an interview.
Questions sent to the Abidjan-headquartered bank on Wednesday were not responded to at the time of going to print.