THE debt-ridden Zimbabwean government is now pushing for fresh negotiations with its creditors to reduce interest on debt as Treasury seeks to extricate the country from the debt burden which has become an albatross.
BERNARD MPOFU
Following several failed attempts to settle arrears with international financial institutions such as the World Bank, International Monetary Fund and the African Development Bank, which all enjoy preferred creditor status, Zimbabwe, which has been struggling to access long-term concessional capital, is considering a change in tack.
Official figures show that as at December, 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 the end 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 the African Development Bank, 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).
The Non-Paris Club creditors are owed US$1.67 billion, which comprise mainly China (US$1.57 billion) and India (US$70 million). Information minister Monica Mutsvangwa this week said the government will be changing its policy on debt in the coming year.
“In the 2022 National Budget, government will prioritise to sustain macro-economic stability, to create a conducive environment for business investment and to improve the living standards of the majority,” Mutsvangwa said.
“As such, the priority areas of 2022 are the following: effective institution building and governance; and engagement and re-engagement and debt restructuring.”
Previously, the country has tried pursuing several paths such as the Zimbabwe Accelerated Arrears and Debt Strategy and the Lima Plan of 2015. Despite making token payments to creditors, arrears have continued to balloon.
Last month, the World Bank said Zimbabwe’s failure to settle debt arrears with international financial institutions is affecting its ability to access more from a multi-billion-dollar facility organised by multilateral creditors to help developing countries to deal with the socio-economic impact of the Covid-19.
Zimbabwe defaulted on arrears payments at the turn of the century, resulting in it failing to access long-term funding for multilateral lenders such as the World Bank and International Monetary Fund (IMF).
“The government’s ability to respond to the pandemic is constrained by limited access to concessional sources of financing,” the World Bank said in its update.
“External debt arrears that reached 78% of external public debt in 2020 have prevented Zimbabwe from benefitting from international financial institutions (IFIs) and global initiatives, such as the global Debt Service Suspension Initiative (DSSI). The DSSI is intended to suspend debt payments from the poorest countries to official bilateral creditors based on countries’ requests for forbearance, with a view to providing immediate liquidity to tackle challenges posed by Covid-19”.
