Zimbabwe’s economic woes worsen
The country has an internal and external debt of $10,8 billion. The public debt amounts to $5,6 billion, split between multilateral financial institutions ($2,2 billion), the Paris Club ($2,7 billion) and US$700 million to the non-Paris Club.
Right now, we’ve not paid anything
Last year, the southern African nation presented an ambitious external debt clearance strategy pledging to reduce external debt arrears to international financial institutions (IFIs).
Under this repayment plan, which drew suspicion and admiration, the three IFIs — World Bank, International Monetary Fund and AfDB — would have been repaid simultaneously, as they are considered creditors that should be treated equally. However, Zimbabwe failed to meet its own June 30 deadline.
“Right now, we’ve not paid anything,” Reserve Bank of Zimbabwe governor, John Mangudya told local media. “That is why we have this re-engagement process with international financial institutions. This is all part of re-engagement and confidence building measures.”
IMF, on Thursday said there was “no financial programme being discussed with the country at this point”.
Zimbabwe hoped to pay back the three institutions to allow it to borrow again, but IMF says there need to be structural reforms first before the African nation can access any more money.
To further highlight Zimbabwe’s plight, tax authorities say the economy shrunk in the first half of the year, with revenue collections tumbling 6 per cent.
Gross revenue collections for the second quarter grew to $866.96 million from the $781.99 million collected in the first quarter.
“The gross collections were 3 per cent below the target of $892.88 million. This compares favourably with the first quarter revenue performance, where gross collections were 9 per cent below target.”
In the first quarter to March, the Zimbabwe Revenue Authority collected $782 million against a target of $861,83 million, missing the target by 9 per cent. This shows that Zimra has so far collected only $1,65 billion for the first six months.
Economist John Robertson told local media that the low revenue collection is likely to get worse. “After the banning of imports, they will fail to collect more revenue from imports. This will also reduce VAT if stock of goods decreases and there won’t be more profit taxes,” he said.
Cheap financing from multilateral financial institutions has eluded Zimbabwe over the years, after the country gained notoriety as a bad debtor.
This has seen Zimbabwe failing to get cheap long-term funding required in the economy.