Zim debt crisis: No settlement plan

MELODY CHIKONO

ZIMBABWE has for the past two years failed to come up with a debt settlement plan to clear arrears to multilateral financial institutions.

Finance and Economic Development minister Mthuli Ncube has been struggling to table a tangible debt clearance plan to unlock fresh funding.

External debt is estimated at US$8,2 billion with 17% owed by public entities through guarantees.

Multilateral external debt, as at the end of September 2020, stood at US$2,7 billion, of which 90% are arrears.

Zimbabwe owes the World Bank Group US$1,3 billion, European Investment Bank US$329 million and other multilateral creditors US$28 million, at a time bilateral external debt is estimated at US$5,6 billion (68% of public debt), of which arrears account for 71%.

Debt owed to the Paris Club is US$3,6 billion and Non-Paris Club, US$1,6 billion.

The International Monetary Fund (IMF) Staff-Monitored Programme (SMP) aimed at key structural reforms is off the rails while the Transitional Stabilisation Programme (TSP), which acknowledged the need for debt repayment, came to an end.

The National Development Strategy 1 has been adopted.

The African Development Bank (AfDB) has been negotiating for debt settlements with other multilateral institutions.

But AfDB officer-in-charge Walter Odero this week confirmed that there was no debt settlement plan since January 2020.

“Previously, the IMF Staff Monitored Programme (SMP) for the period May 2019 to March 2020 was to guide dialogue towards an agreed debt settlement plan. However, the programme collapsed in September 2019,” Odero said.

“You may want to refer to IMF Zimbabwe Country Representative for further views on this matter.”

He further said: “Outstanding arrears at the moment to the Bank Group are US$730 million. We do not track monthly accumulation as different instruments mature at different times and figures also change when the government makes quarterly token payment”. Odero said the bank will continue engaging other financial institutions but the SMP must be  re-established.

An IMF delegation is expected in Zimbabwe in the coming months to resuscitate the SMP.

“The government needs to re-engage with the international community as specified in the National Development Strategy 2021-2025,” he pointed out

“As indicated earlier, the government needs to agree on some deliverables by way of an SMP which would include reforms in fiscal, financial and monetary policy framework.

“In particular, efforts to significantly reduce fiscal deficit, reduce inflation to a single digit and ensure that the exchange rate is not misaligned, would be key outcomes.”

Odero further said: “This is the cost to the country for not realising foreign and domestic financing that would in turn be invested in much-needed infrastructure. In our Infrastructure Flagship Report of 2019, we estimated that US$3,4 billion would be needed to be invested each year between 2020 and 2030, so as to have an international standard infrastructure network and system suitable for development. The more we delay to get such resources for development.