The Sunday Mail
THE debt champion of Zimbabwe’s arrears clearance, African Development Bank (AfDB) president Dr Akinwumi Adesina, and former president of Mozambique, Mr Joaquim Chissano, were in Harare last week on a critical mission — to have detailed discussions with key stakeholders, including representatives of creditors, on this matter.
The commitment shown by all the parties, including President Mnangagwa, indicates that, if the deliberations are meticulously handled, we can get a payment plan that makes sense and opens the required new lines of credit, which we will use very carefully this time.
Zimbabwe has a debt of over US$17 billion, of which a significant chunk is in arrears, and those arrears make it almost impossible to access low-interest capital loans from multilateral or private sector lenders.
Access to new World Bank or other multilateral funding will accelerate Zimbabwe’s economic growth, as their interest rates are sufficiently low, well below commercial rates, and repayment terms are good. The funding of infrastructure and other key economic enablers will result in growth that generates the extra tax revenue and the much-needed foreign currency.
In his presentation at the meeting in Harare on Thursday, Dr Adesina dwelt on the debilitating effects of the additional problem of financial sanctions imposed by the United States and its Western allies. Crucial clauses of the US Zimbabwe Democracy and Economic Recovery Act (ZIDERA) that compel American officials holding influential positions in multilateral lending institutions to vote against anything favourable for Zimbabwe were a major obstacle.
ZIDERA laid down a number of conditions. In theory, the clause about land reform, which actually triggered the US actions, has also fallen away with the agreement signed between the Government and the former landowners, a deal that is being religiously followed and implemented.
It is commendable that the Second Republic has demonstrated commitment to address some of the ills of the First Republic, and policies such as Zimbabwe is Open for Business have charmed many global investors.
Zimbabwe has stated firmly that it wants to pay its debts. What are termed token payments are being made.
These are designed to show that we accept the debts exist, and that we wish to pay back. So, the main area left is the practical way we can do this.
Zimbabwe is not the sort of total basket case that meets most criteria of most lenders for emergency debt relief. We are not yet an upper middle-income country, but we are not on the bottom rungs of the ladder. As such, on favourable terms, we can extinguish the debt.
Normally, a country like Zimbabwe — which has, under the Second Republic, taken a very deep breath and pushed through fiscal and monetary reforms for the past five years — would get a decent hearing and almost certainly a rescheduling of debt.
Rescheduling does not wipe out the debt but creates an agreed payment plan that sees the repayments move into the realm of practical possibility. This would probably be based on a percentage of Zimbabwe’s rapidly rising export earnings in the region of over US$10 billion and resulting in positive balance of payments. Now, we have that, and that is a necessary starting point for rescheduling. We would, in normal circumstances, be able to negotiate the conditions that officials at the World Bank and private lenders would almost certainly want to see, starting with a continued commitment to maintain our fiscal and monetary reforms and balance of payments surplus so that we actually have the money.
Rescheduling would remove the arrears block on new borrowing in both multilateral and banking circles. Technically, a rescheduled debt is not in arrears and doors can open. In the multilateral arena, we need to remember that the main institutions talk to each other, and that if you are in arrears with one, generally, the rest, even if your record is now clean, will not open new borrowing, so we need everyone on board.
We have seen some borrowing for major roadworks, such as the Mbudzi interchange in Harare, which can be set off against toll-gate revenue. We have seen the complete rebuild and upgrade of the Beitbridge Border Post in a deal that allows the development partner to recoup the investment from the agreed fees charged to users over 17,5 years.
Zimbabwe has one of the lowest budget deficits in the world under the tight fiscal policies of the Second Republic. Careful analysis of the budget shows that this deficit, raised from careful borrowing, is a fraction of the capital budget and requires a revenue stream to service it.
We, therefore, implore parties in this matter including the US Government, to give this arrears rescheduling a chance and this will enable Zimbabwe to reclaim its rightful place in the community of nations.
