Zimbabwe is now pinning its hopes on the African Development Bank (AfDB) board to meet and deliberate over the country’s eligibility to US$600 million bridge finance required to clear arrears with the regional bank, Reserve Bank of Zimbabwe governor John Mangudya has said.
This comes as the International Monetary Fund—one of the country’s three preferred creditors together with the World Bank and AfDB –is demanding far-reaching reforms from Harare.
The debt-ridden country is 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.
“The re-engagement exercise is work in progress. Our access to the AfDB Pillar II resources is dependent on the bank’s meeting. We want to clear the arrears as quickly as possible so that we can improve our access to international finance,” Mangudya said yesterday.
“It is in the best interest of Zimbabwe to sort out or clear its financial burden.”
Documents seen by the Zimbabwe Independent show that the debt-ridden country is also competing with other fragile countries to access AfDB Pillar II resources which will aid in clearing its arrears.
According to an AfDB internal memo titled Zimbabwe Processing of Debt Arrears Clearance Information Note for July 2016: The African Development Fund-13 Report, also obtained by The Independent, 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 time is running out for Zimbabwe to have the prerequisite reforms to access the bridge facility.
“A significant portion due to AfDB and Africa Development Fund totalling about US$627 million will be refinanced through a bridge facility, whereby the AfDB’s Pillar II Fund under the Transition Support Facility of about US$548,8 million will be utilised to repay the bridge facility almost simultaneously to the lenders’ approval and disbursement of facility proceeds on behalf of Zimbabwe. In this regard, Standard Chartered shall co-finance the bridge facility with Afreximbank,” reads the confidential document.
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 re-alignment and re-organisation of the public service wage structure, to secure funding.
IMF deputy spokesman William Murray last week said Zimbabwe should craft an economic plan anchored on a raft of reforms.
“A comprehensive economic transformation plan will be important to ensure the viability of the dollarised Zimbabwean economy. The authorities need to take action to streamline public sector wages urgently. They also are encouraged to accelerate public enterprise reform, improve public financial management, develop key infrastructure and to strengthen the rule of law and to improve governance,” Murray said.