THE MDC Alliance, a coalition of opposition parties, is pushing for the abandonment of the Lima arrears clearance plan for the Highly Indebted Poor Countries option, arguing that the current plan could lock the country in a perpetual debt trap.
By Bernard Mpofu
Zimbabwe has committed to settle its arrears to the World Bank and the African Development Bank (AfDB) by April after the southern African country secured funding.
Under the Lima plan, Zimbabwe committed to planned simultaneous repayment modalities to the International Monetary Fund (IMF), World Bank and AfDB.
The 2015 Lima process, which received support from creditors and development partners, envisaged clearing arrears to the IMF using the SDR holdings, to the International Bank for Reconstruction and Development with a bridge loan from a bilateral creditor, to International Development Association drawing on a turnaround facility, and to the AfDB with the AfDB Pillar II Trust Fund set up for countries’ arrears clearance.
Former finance minister and critic of the Lima plan, Tendai Biti, said Britain should not support the arrears programme.
“Lima is anti-Zimbabwe people. Debt is a disease. You don’t cure an alcoholic by locking him in a bottle store. Lima is a poisoned chalice because we are poor already,” Biti said.
Biti, a key member of the opposition alliance, said funds sourced to pay the arrears had usurious rates which would perpetuate the country’s debt crisis.
Before successfully clearing its arrears to the IMF recently, Zimbabwe owed three international financial institutions which enjoy preferred creditor status, US$1,8 billion.
Zimbabwe presented an arrears clearance plan to its creditors in Lima, Peru, in 2015, which was anchored on several financial sector and structural reforms. The country 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.
Last month, officials close to the Lima plan told the Independent that Zimbabwe will likely present its programme of action at the IMF and World Bank Spring Meetings in Washington DC from April 20-22. The IMF and World Bank maintained that a binding decision will not be made on Zimbabwe at the Spring Meetings, even if it clears its debts, because the United States of America and some influential European Union members are adamant that the country should pass the legitimacy test before accessing fresh capital.