Zimbabwe looks to clear its debts as it re-engages with the world

By Julian Pecquet

Posted on Tuesday, 18 October 2022 15:31
Zimbabwean President Emmerson Mnangagwa addresses the media at State House in Harare, Zimbabwe, Tuesday, March, 17, 2020. (AP Photo/Tsvangirayi Mukwazhi)

Zimbabwe is working with the World Bank and the IMF to clear its debts as it looks to re-engage with the international community, Finance Minister Mthuli Ncube said during a press conference of African finance ministers over the weekend.

Harare has begun issuing bonds with a life of anywhere between two years and 20 years to help pay back its creditors and hopes to make them tradable, Ncube said in response to a question from The Africa Report.

The country is also issuing an instrument that will allow the country to compensate white farmers whose lands were expropriated under the late President Robert Mugabe to resettle black families.

Paris Club debt

In addition, he said, Zimbabwe has been making token payments to international creditors including the World Bank, the African Development Bank (AfDB), the European Investment Bank and Zimbabwe’s 17 Paris Club creditors “to show that we want to be a good debtor, and not a bad debtor.”

“That’s our attitude,” Ncube said at the IMF and World Bank annual meetings in Washington.

Recent tightening of the monetary policy and the contained budget deficits are policies in the right direction.”

“But we’re also engaging while we’re here with the IMF and the World Bank on a path to eventually clear the IFI (international financial institution) debt first before we resolve the Paris Club debt issue.”

Zimbabwe owes some $13.5 billion to foreign creditors and has been ineligible for IMF lending for more than two decades due to its “unsustainable debt and official external arrears,” according to the IMF.

“A Fund financial arrangement would require a clear path to a comprehensive restructuring of Zimbabwe’s external debt, including the clearance of arrears; a reform plan that is consistent with macroeconomic stability, growth and poverty reduction; a reinforcement of the social safety net; and governance and transparency reform,” the IMF said after a visit to the country last month.

“International re-engagement remains critical for debt resolution and access to financial support.”

The mission credited “the authorities’ efforts to stabilise the local foreign exchange market and lower inflation,” finding that “the recent tightening of monetary policy and the contained budget deficits are policies in the right direction and have contributed to the narrowing of the parallel market exchange rate gap.”

“Further efforts are needed to durably anchor macroeconomic stability and accelerate structural reforms,” the IMF said.

Way forward

Ncube said another IMF visit is scheduled for December before further discussions on a staff-monitored programme in the first half of 2023.

“It will clear the path for us to access resources from a sponsor” to bridge funding to pay back the international institutions first, and then with the bilateral Paris Club creditors.

The remarks come as the government of President Emmerson Mnangagwa looks to reengage with the West following decades of bad relations under Mugabe.

Sanctions remain

The diplomatic outreach has earned an invite to President Joe Biden’s US-Africa Leaders Summit in December for Foreign Minister Frederick Shava, even as Mnangagwa himself remains under US sanctions, accused of undermining democratic processes in the country.

Ncube said Zimbabwe now has a path forward on debt, thanks notably to the AfDB and its president, Akinwumi Adesina.

“We’re very pleased that the African Development Bank president has offered to play a championship to bring everyone together to the table … as we follow that roadmap to arrears clearance,” he said.

In July Adesina visited Mnangagwa in Harare and offered $4.2 million to help Zimbabwe with arrears clearance.

“It is about the people of Zimbabwe,” Adesina said at the time. “They have suffered long enough – for two decades now. When you look at the situation today, 40% of the country’s population lives in extreme poverty. We must change that and create new hope. I believe that it is time to reinvigorate, and re-dynamise the country’s economy because it is critical for the Southern African community.”

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