ZIMBABWE missed out on a G7-backed multi-billion-dollar stimulus package designed to help countries of the global South weather economic shocks caused by the Covid-19 pandemic.
The reason for the country’s exclusion is the failure to pay arrears to international financial institutions (IFIs), Finance minister Mthuli Ncube has said.
The Covid-19 pandemic has precipitated an unprecedented economic crisis worldwide, with disastrous social consequences. After 25 years of continuous growth, Africa was severely hit and suffered recession in 2020.
Despite receiving a quota-based allocation of nearly US$1 billion from the International Monetary Fund (IMF) last year, Harare was ineligible to receive more financial support after its debt stock ballooned over the years.
The country defaulted on arrears payments at the turn of the millennium, resulting in the failure to access long-term funding from multilateral lenders such as the World Bank, International Monetary Fund and the African Development Bank.
As first reported by The NewsHawks last year, the world’s advanced economies parcelled out part of their IMF Special Drawing Rights (SDR) to shore up developing countries currently reeling from the impact of Covid-19.
“Zimbabwe cannot adequately respond to the Covid-19 pandemic in a way that protects the vulnerable and addresses inequality without arrears clearance, debt relief and restructuring,” said Ncube said in the latest Arrears, Debt Relief and Restructuring Strategy availed to The NewsHawks.
“The country has already been left out of the Covid-19 pandemic responses by the IFIs, the G7 and G20 including the Debt Service Suspension Initiative (DSSI) and G20 Common Framework. The country has to emerge from the Covid-19 pandemic and debt crisis in a position to achieve its developmental goals in Vision 2030 and NDS [National Development Strategy].”
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.
The G7 is an informal grouping of seven of the world’s advanced economies. The G20 holds a strategic role in securing future global economic growth and prosperity. Together, the G20 members represent more than 80 percent of world gross domestic product, 75% of international trade and 60% of the world population.
In May 2021, France hosted the Paris summit on supporting African economies after the Covid-19 pandemic caused economic shocks on the continent. Paris took the lead and made a firm commitment to lobby advanced economies to parcel out part of their SDR to weaker economies.
A declaration of the document seen by The NewsHawks shows that Zimbabwe, which badly needs financing to stabilise its economy, was conspicuous by its absence at the Paris Summit which was attended by Francophone, Saxophone and Lusophone countries in June 2021.
Countries which adopted the declaration included: Algeria, Angola, Belgium, Benin, Burkina Faso, Cameroon, Canada, China, Comoros (a Chinese ally which counterbalanced Russian and Indian influence in the Indian Ocean), Congo, Democratic Republic of Congo, Ivory Coast, Egypt, Ethiopia, France, Germany, Ghana, Italy, Japan, Kenya, Mali, Mauritius, Mauritania, Morocco, Mozambique, Netherlands, Niger, Nigeria, Portugal, Rwanda, Saudi Arabia, Senegal, Spain, South Africa, Sudan, Tanzania, Chad, Togo, Tunisia, United Arab Emirates, United Kingdom, United States of America, Zambia.
The summit was also attended by the chairperson of the African Union, the chairperson of the African Union Commission, the president of the European Council and the president of the European Commission.
According to the World Bank, although management of central government finances improved in 2019, sizeable contingent liabilities coupled with a considerable debt burden and limited access to concessional financing continue to limit the country’s ability to clear arrears.