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AfDB mulls US$800m debt clearance plan for Zim

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THE African Development Bank (AfdB) is on working on a nearly US$800 million bridge-financing facility to help Zimbabwe clear its arrears with the regional bank as the debt-ridden nation seeks to normalise relations with creditors, The NewsHawks has established.

BERNARD MPOFU

Zimbabwe has had arrears with the AfDB and the World Bank since the turn of the millennium and this has disqualified the country from accessing long-term cheap capital from multilateral lenders. A few years back, the country cleared its arrears with the International Monetary Fund (IMF) using its Special Drawing Rights holdings, but Harare remains ineligible to access capital until it clears arrears with the three multilateral lenders.

This comes as AfDB president Aknwumi Adesina (pictured) is soon expected in Zimbabwe as the country seeks to rejuvenate its arrears clearance plan, barely a month after the IMF expressed reservations on the ongoing programme.

Information gathered by The NewsHawks shows that the bridge-financing would be modelled along the same structure as that of Somalia and Sudan which have since cleared their arrears with the regional financial institution.

Adesina’s visit comes a few months after the regional lender’s director-general for southern Africa, Leila Mokadem, said the regional lender would support Zimbabwe’s debt and arrears clearance plan.

Finance minister Mthuli Ncube said Adesina is expected to jet into the country to help Zimbabwe clear its arrears.

Yacine Fal, AfDB acting vice-president in charge of regional development, integration and business delivery, said the regional bank’s boss would play a role in helping Zimbabwe’s re-engagement with creditors.

“The AfDB is very happy with this continued re-engagement with the authorities and in this context we are here to also convey our appreciation of the positive commitment of Dr Akinwumi Adesina, president of the AfDB, to act as a champion in supporting Zimbabwe’s efforts with regards to arrears clearance scheme and other efforts to restore economic resilience,” she said.

Official figures show that as at 31 December 2021, Zimbabwe’s total public and publicly guaranteed (PPG) debt stood at US$10.7 billion. This represents 72.6% of the country’s gross domestic product. PPG external debt owed to the multilateral creditors, as at 31 December 2020, amounted to US$2.68 billion, of which US$1.53 billion is owed to the World Bank Group, US$729 million to AfDB, US$356 million to the European Investment Bank and US$68 million to other multilateral creditors.

On the other hand, bilateral PPG external debt amounted to US$5.75 billion, with US$3.79 billion owed to Paris Club bilateral creditors mainly comprising Germany (US$1.02 billion), France (US$724 million), Japan (US$435 million), UK (US$416 million) and USA (US$285 million).

John Mangudya, Reserve Bank of Zimbabwe governor, told The NewsHawks that despite past false starts in clearing arrears such as the Lima plan of 2015, the authorities remain committed.

“We are in an arrears clearance programme, we haven’t forgotten about it. It’s a continuous process and it always takes two to tango,” Mangudya said.

“You need also people to assist you obviously for that arrears clearance. You need both the domestic support and international support to clear our arrears. We remain committed and we cannot wish it away.”

Last October, Mokadem said the regional lender will support Zimbabwe’s debt and arrears clearance plan.

“The bank continues to work with the international monetary institutions and other development partners in supporting the government to meet conditions to clear Zimbabwe’s arrears, as we did in Sudan and Somalia, who are now back on lending,” she said at the launch of the AfDB Zimbabwe country brief.

“We appreciate the resumption of token payments to multilateral development banks and the Paris Club members. We are also working on the drafting of the roadmap on arrears clearance. The roadmap should be coordinated and I think it will be (achieved) with all stakeholders, to achieve intended results. One of the key objectives in our country brief is really to aggressively support the government in this arrears clearance agenda.”

Following last year’s approval of the proposal by the boards of directors of the African Development Bank Group to clear about US$413 million in arrears on loans owed by Sudan, AfDB completed the arrears clearance process, enabling the East African country to  have immediate access to new financing.

According to the regional lender, the clearance of Sudan’s arrears was made possible with the support of the United Kingdom government through bridge financing of 148 million Britain pounds to clear Sudan’s arrears to the African Development Fund. Sweden provided grant financing of about US$4.2 million to meet Sudan’s burden-share for the operation. The Republic of Ireland has also committed to providing 150 000 euro towards Sudan’s future debt service.

Consequently, the AfDB sanctions on Sudan were lifted and a policy-based operation was provided to the country as part of the regional lender’s full re-engagement with the country.

Last month, the IMF said Zimbabwe’s re-engagement with creditors had lost steam despite ongoing efforts by Harare to normalise relations with multilateral creditors before extricating itself from a huge debt overhang.

 “International re-engagement has lagged as stakeholders seek political and economic reforms. The 2019 Staff-Monitored Programme experienced significant policy slippages and elapsed without a review,” the IMF said.

“Directors encouraged the authorities to advance reforms, noting that a new Staff-Monitored Programme could help establish a track record of sound policies and provide further impetus to their re-engagement efforts.”

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