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New debt plan on the cards

ZIMBABWE will present a new debt clearance plan at the International Monetary Fund (IMF) and World Bank Spring Meetings in Washington DC in a fortnight’s time at a time international financial institutions (IFIs) are reluctant to accept a stringent US$1,2 billion commercial deal sought by Harare to clear World Bank arrears.

By Owen Gagare

The government had committed to paying the US$1,2 billion arrears to the World Bank by April, as the first step towards unlocking fresh funding from multilateral institutions.

Harare has been engaging British multinational bank Standard Chartered Plc and other institutions to help raise US$1,8 billion to clear arrears to multi-lateral institutions for the country to secure US$2 billion in fresh funding.

Other than the US$1,2 billion arrears to the World Bank, Harare also owes US$600 million to the African Development Bank (AfDB). Zimbabwe is currently saddled with almost US$12 billion debt overhang that has affected the country’s access to concessionary funding.

President Emmerson Mnangagwa last month told the Zimbabwe Independent that Harare had embarked on a diplomatic initiative with Britain and other creditors to seek debt rescheduling and cancellation to improve the country’s risk profile. Finance minister Patrick Chinamasa however last week told the public media that Zimbabwe had secured $1,2 billion needed to clear World Bank arrears.

Zimbabwe presented an arrears clearance plan to its creditors in Lima, Peru, in 2015, which was anchored on several financial sector and structural reforms.

Officials handling the Lima Plan told the Independent that the plan was basically dead, and Harare is now expected to present a new programme of action at the Spring Meetings from April 20-22. They however maintained that a binding decision will not be made at the Spring Meetings, 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.

Washington and European capitals are, among other considerations, insisting that Mnangagwa’s government — which rose to power on the back of a military coup — should earn its legitimacy by delivering a credible election, strengthening democracy and human rights as well as ushering in progressive economic reforms.

Elections, the sources, say will also determine how the IFIs and members of the Paris Club will engage Zimbabwe going into the future.

“There will be a new plan, but I don’t know what it will be called. Perhaps it will be called Washington Plan or Lima Plus, who knows because the Lima Plan is dead,” said one official.

“There will be a side event in Washington where the government will present its economic plan. It will not be an engagement; it will be an information session because it’s not time for commitments. Commitments will only come after elections. There will also be a workshop on debt clearance which will be restricted to Zimbabwe and officials from World Bank and IMF.

“But the World Bank and IMF are looking at the long-term sustainability of the commercial arrangement which Zimbabwe has been seeking. We believe it will worsen the situation in Zimbabwe. The commercial debt has collateral, in gold and platinum sales and in the long term we believe it will worsen the cash situation in the country,” the official said.

The official added real discussions, including a reform package, are likely to be held by the end of the year and possibly at the IMF board meetings in October.

“Discussions with the Paris Club are expected to start sometime next year although there have been informal engagements since February,” another source said.

“Members of the Paris Club are prepared to engage once the political environment is clear. The question of whether there should be debt rescheduling or debt clearance will be discuss at that time, because the Paris Club can only discuss with Zimbabwe after it has reached an agreement with the multilateral institutions.”

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