The Sunday Mail
THE African Development Bank (AfDB) and the Bretton Woods institutions are crafting ways to clear Zimbabwe’s debt — estimated at US$8,3 billion — to help stir economic growth in the short-term.
AfDB executive director Mr Alieu Momodou Ngum, who recently led a high-powered delegation to Zimbabwe, told The Sunday Mail Business there were high prospects of an economic boom if the country reached a debt clearance agreement with multilateral lenders.
He could not say when the debt clearance strategy would be completed.
Zimbabwe external arrears stand at US$7,2 billion while internal debt is US$1,1 billion with the AfDB owed US$566 million.
The huge debt, market watchers say, blocks the country from accessing concessionary loans to capacitate industry to retool and boost manufacturing.
“I see a country with great potential and many opportunities — the strong natural resource base, highly educated people, a resilient private sector, and infrastructure that is relatively better than many African countries.
“The economic situation has stabilised from the hyperinflation era. Growth remains positive though it has now stabilised at lower levels of around 3 percent, and lower than the Zim-Asset target of about 6 percent.
“The main challenge for the country remains the high levels of external debt and arrears which are an impediment to external sustainability and economic development. Against this background, the AfDB, together with the World Bank and the IMF, are at an advanced stage in the development of a roadmap for the country’s arrears clearance.
“The clearance of arrears is critical in unlocking development financing to the country and there is therefore need for development partners to move swiftly and in harmony to resolve the debt and arrears situation of the country,” said Mr Ngum.
Zimbabwe is committed to paying what it owes and a conference to discuss the issue has been tentatively set for next month.
The country has been making payments to its creditors, with US$4 million having been paid to the World Bank; US$250 000 to European Union creditors (including the Paris Club and the European Investment Bank) and US$150 000 to the IMF.
Mr Ngum said the commitment was “exemplified by, amongst others, the successful implementation and completion of the IMF Staff Monitored Program-I (SMP-I) and continued commitment to reforms through SMP-II”.
He added: “The (AfDB) is confident that with progress made so far, a lot can be achieved through innovative solutions to the country’s debt and arrears problem. We are further pleased with the financial sector reforms aimed to restore confidence in the system.
“There is commendable progress which includes, amongst others, the restoration of the Reserve Bank’s role of lender of last resort, the resuscitation of the interbank facility, reduction in non-performing loans (NPLs) and work towards creation of credit bureaus.”
NPLs rose from 18 percent in June to 20 percent in November 2014, above the 5 percent international benchmark. The figure continues increasing even outside of new lending because of penalty interest rates accruing on unpaid loans. The RBZ has created the Zimbabwe Asset Management Corporation (Pvt) Ltd to acquire US$700 million worth of NPLs.
Zamco has so far acquired US$65 million worth of NPLs.
RBZ boss Dr John Mangudya recently warned that NPLs could cripple the economy as “banks will not have capacity to lend new money”.
Mr Ngum also said the AfDB was keen to assist the private sector.
In 2011, the AfDB board approved an US$8 million loan to finance the Lake Harvest Aquaculture expansion project on Lake Kariba.
The bank is preparing a technical assistance project to increase competitiveness of beef and leather value chains, primarily through building production capacities and boosting access to local and export markets.
Mr Ngum said the AfDB would support initiatives to improve the business environment, including “measures to address political and commercial risk profile of the country which currently makes it difficult to attract private capital investment which the country desperately needs to recover from its precarious state”.
“To this effect, the bank will seek to leverage private sector financing to support the country to become a full-fledged member of the African Trade Insurance Agency (ATI) of which the bank is also a substantive shareholder and champion of its role in Africa.
“Beyond its direct investment, the bank group continues to support Zimbabwe’s private sector through regional financial institutions including Development Bank of Southern Africa (DBSA), PTA Bank and African Export-Import Bank (Afreximbank) that operate and invest in Zimbabwe.
“Going forward, the bank will explore options to enable Zimbabwe to access all financial products available in the bank.”
Mr Ngum welcomed efforts to ease the cost of doing business to allow greater FDI inflows.
