ZIMBABWE debt and arrears clearance negotiations resumed this week after former Mozambican prime minister Luisa Diogo (pictured) flew into Harare to lead the process, The NewsHawks has established.
After several failed attempts to settle arrears with international financial institutions (IFIs) such as the World Bank and the African Development Bank (AfDB), which all enjoy preferred creditor status, Zimbabwe, which has been struggling to access long-term concessional funding, adopted a new strategy which is led by AfDB.
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.
Sources familiar with the developments told The NewsHawks thematic working groups have since the last meeting been working around the clock to come up with the major talking points for this week’s engagements.
“The third structured dialogue meeting on arrears started on Thursday and the former prime minister of Mozambique is already in town,” a source said.
“The land sector which is chaired by the Office of the President, Swiss ambassador and the United Nations while economic working group will be led by the IMF. Deliberations made by these sectors will be discussed during the structured dialogue.”
Three main pillars, namely economic reforms, governance reforms and compensation of white former commercial farmers were identified as major areas for discussion during the first high-level meeting held on 1 December.
In February former Mozambican president Joaquim Chissano and AfDB chief Akinwumi Adesina led a high-level meeting on Zimbabwe’s debt crisis where overarching political issues topped the agenda.
Last month, President Emmerson Mnangagwa admitted during the Second Structured Dialogue Platform Meeting on the Arrears Clearance and Debt Resolution Process that Zimbabwe’s debt overhang is weighing heavily on the economy, as the country cannot borrow from multilateral institutions because of its failure to honour obligations.
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.
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.