Chissano to lead Zim debt talks this month
FORMER Mozambican president Joaquim Chissano and African Development Bank (AfDB) chief Akinwumi Adesina are later this month expected to hold a high-level meeting on Zimbabwe’s debt crisis where overarching political issues are expected to top the agenda, The NewsHawks has learnt.
Following several failed attempts to settle arrears with international financial institutions (IFIs) such as the World Bank, International Monetary Fund and the AfDB, which all enjoy preferred creditor status, Zimbabwe, which has been struggling to access long-term concessional capital, is considering a change in tack.
As first reported by The NewsHawks last December, the former Mozambican leader, one of the few surviving early pan-Africanists, was appointed to mediate over Zimbabwe’s intransigence in adopting key political governance reforms required by creditors to resolve the debt crisis.
Kelvin Banda, AfDB principal economist for Zimbabwe, told delegates attending a virtual meeting conducted by the Zimbabwe Economics Society on the country’s economic outlook that Zimbabwe is the only regional member country of the AfDB group under sanctions due to arrears amounting to nearly US$736 million.
The regional lender estimates that as of 31 December 2022, the figure stood at US$750 million. Zimbabwe is also in arrears with the World Bank amounting to US$1.47 billion and the European Investment Bank (US$372 million) out of the US$14 billion debt.
“Also important to mention is that because of our limitations as a bank on the political side, the government has appointed former President of Mozambique Joaquim Chissano to be facilitating re-engagement with development partners,” Banda said.
“We are expecting the next meeting on the 23rd of this month where president Adesina and His Excellency former president Chissano will be present to map out the key issues that need to be taken forward and we hope that this will lead to a debt resolution forum that will address the key issues and we hope that in the end this process can lead to the clearance of debt and arrears for Zimbabwe.”
Banda said the first high-level meeting held on 1 December last year agreed on three main pillars, namely economic reforms, governance reforms and compensation of white former commercial farmers.
Chissano, a politician who served as Mozambique’s second leader from 1986 to 2005, took over from Samora Machel who was killed in a plane crash.
Chissano is credited with transforming the war-torn Mozambique into one of the most economically successful African states. After his presidency, Chissano became an elder statesman, envoy and diplomat for both his home country and the United Nations. Chissano also served as African Union chair from 2003 to 2004.
According to the new debt plan, Zimbabwe is exploring traditional debt relief options, especially the Highly Indebted Poor Country (HIPC) Initiative, which provides maximum debt relief for beneficiary countries and non-HIPC initiatives.
As part of re-engagement with international financial institutions and other creditors, the Zimbabwean government in March 2021 resumed making quarterly token payments to the Multilateral Development Banks (MDBs), the World Bank Group (US$1 million), the African Development Bank Group (US$500 000) and the European Investment Bank (US$100 000).
Treasury also began making quarterly token payments amounting to US$100 000 to each of the 16 Paris Club bilateral creditors in September 2021, as a sign of its commitment to the engagement and re-engagement process with the international community.
The authorities say Zimbabwe is also facing serious debt service capacity challenges – liquidity challenges, as reflected by low debt service ratios (actual debt service to revenue and exports), while at the same time accumulating arrears.
Experts say, looking ahead, the country will face similar challenges in debt servicing which requires on average US$140 million annually, hence the need for debt restructuring.