Zim to cut on token payments to creditors
Zimbabwe will approach the International Financial Institutions (IFIs) for some “deep haircuts” on the quarterly token payments the country is making to external creditors to relieve itself from debt distress.
The country’s total public and publicly guaranteed debt stock is estimated at US$21,1 billion, comprising external debt of US$13 billion and a domestic debt of US$8,1 billion.
Currently, the southern African country is in debt distress due to the accumulation of external debt payment arrears amounting to US$6,7 billion — and the external debt overhang is weighing heavily on Zimbabwe’s development needs owing to lack of access to international financial resources to support economic recovery, priority programmes and projects under the National Development Strategy 1 (NDS1).
In December 2022, the Government established a Structured Dialogue Platform as part of its Arrears Clearance, Debt Relief and Resolution Strategy, with all creditors and development partners to institutionalise structured dialogue on economic and governance reforms to underpin the Arrears Clearance and Debt Resolution
Process.
Since December 2022, a series of structured dialogue platform meetings have been convened in Harare including, a high-level debt resolution forum.
The meetings have focused on three strategic pillars — economic growth and stability reforms; governance reforms and land tenure reforms, compensation of former farm owners; and the resolution of Bilateral Investment Protection and Promotion Agreements (BIPPAS).
In an interview with journalists
after launching the Zimbabwe Inter-Governmental Fiscal Transfers System administrative manual in Harare on Wednesday, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube, said the country’s debt resolution process was presently in motion with no hitches.
The World Bank has received US$1 million, taking cumulative payments made to date to US$70 million.
The African Development Bank (AfDB) has received US$500 000, taking cumulative payments to date to US$37,4 million while the European Investment Bank has received US$100 000 taking the cumulative payments made so far to US$5,6 million.
Mthuli has said the Government is also making quarterly token payments of US$100 000 to each of the 17 Paris Club bilateral creditors (cumulative token payments made to date are US$12,7 million).
“When we started the process for clearing our arrears one of the things that we thought we should do as the first order of business was to start making token payments.
“So, we are making token payments to the 17 Paris Club partners, we are also making token payments to the IFIs that we owe or making token payments to everyone so that we do not leave anyone behind.
“That is continuing and we are very consistent, those token payments are happening,” he said.
On the International Monetary
Fund (IMF) Staff Monitored Programme, the treasury chief said the Government has engaged the multilateral institution.
“We are engaged on that programme and they will be coming back in September for further engagements and calibration of a potential Staff Monitored Programme (SMP).
“Of course, we have to reach an agreement on specific targets and we work with them in agreement to reach those targets and then run it over a year or so,” he said.
SMPs are informal engagements between national authorities and the IMF staff to monitor the authorities’ economic programme.
The IMF staff programmes can also help a country establish a track record of policy implementation and thus a successful SMP can pave the way for an IMF financial arrangement or for the resumption of a financial arrangement that has gone off-track.
Meanwhile, Zimbabwe and other countries in southern Africa have been hit by the El Niño-induced drought that has wreaked havoc on the country’s agriculture sector, decimating crops — depleting water sources and leaving millions of people on the brink of starvation.
Against this background, the Government in the Mid-Term Budget and Economic Review to be presented in Parliament on the 25th of this month, will now be forced to downgrade
this year’s economic growth the Treasury had initially projected at 3,5 percent.
“As you know we had projected economic growth at 3,5 percent, we as Government as well are revising our growth downwards.
“We are aware that some of the partners that we work with have figures already at 2 percent (the IMF), AfDB also has got a figure, and then the World Bank the same,” said Mthuli.
President Mnangagwa has declared the 2023/2024 agricultural season a State of National Disaster following the El Niño-induced subdued rainfall pattern which resulted in food deficit in many areas leaving most families in need of food aid.
At least 2,7 million people are expected to be food insecure.-chronicle
