Zim reforms could impress creditors, Mthuli

Zimbabwe has made remarkable strides in implementing reforms necessary for resolving its debt and arrears with the hope of securing a sponsor to provide a bridge loan to “preferred creditors” by the end of next year, a senior Government official has revealed.

Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, in an interview recently highlighted several reform initiatives, including the introduction of a structured currency, the assumption of quasi-fiscal activities by Government from the Reserve Bank, the abolition of the death penalty as well as progress on compensation for white former farmers.

The Staff-Monitored Programme expected to be signed with the IMF this year, will further strengthen reform efforts.

If successful after 18 months, the programme could pave the way for Zimbabwe to secure a bridge loan to clear its arrears, starting with the African Development Bank, the World Bank and the European Investment Bank.

Zimbabwe has a debt overhang of roughly US$18 billion owed to multilateral and bilateral institutions, which have since stopped providing credit to the country due to some arrears.

“Stakeholders…are all helping us to close the gap for Zimbabwe as a debtor with all creditors,” said Mthuli.

“The introduction of Zimbabwe Gold currency is part of those reforms. We have (also) taken over the quasi-fiscal activities (from the) Reserve Bank to the central government.

“On the governance pillar, again we are going to get rid of the death penalty. In terms of the land tenure system, we have completed the design of our system for compensating the farmers…and we are pleased that we have made much progress.

“We will…start compensating those who are covered under bilateral agreements, and also strengthen property rights around land, we are introducing a bankable transferrable 99-year lease on land. So, these are issues we have really been working on in term of strengthening, building trust between Zimbabwe and its partners,” he added.

In December 2022, Zimbabwe formed a Structured Dialogue Platform (SDP), focused on resolving Zimbabwe’s debt burden.

The SDP serves as a platform for the Government, creditors and development partners to engage in constructive dialogue. This dialogue centers on economic and governance reforms that are crucial for clearing arrears and ultimately resolving the country’s debt challenges.

The initiative is spearheaded by Dr Akinwumi Adesina, President of the African Development Bank (AfDB). Joachim Chissano, former president of Mozambique, plays a facilitating role to ensure productive discussions between all involved parties.

The SDP meetings have been focusing on three key areas crucial for addressing Zimbabwe’s debt: economic reforms, governance reforms and land tenure reforms.

To delve deeper into these areas, three dedicated sector working groups have been established.

Each working group has developed a “policy reform matrix” outlining specific reforms needed within their respective pillar.

The economic reforms pillar, co-chaired by the Government, the World Bank, and the IMF, tackles issues related to economic growth and stability.

The governance reforms pillar, co-led by the Ministry of Justice and the European Union, focuses on strengthening transparency and accountability.

Finally, the land tenure reforms pillar, co-chaired by the Office of the President and Cabinet along with the UNDP and Switzerland, addresses land ownership and management issues.

Mthuli said the Government was hopeful by the second half of this year, would secure a SMP with the International Monetary Fund to further solidify economic reforms.

Following 18-month programme likely to be “successful”, the Government hoped to reach a decision point where it could identify a sponsor to help clear the arrears with preferred creditors such as the World Bank, the African Development Bank, and the European Investment Bank, being the first phase of the arrears restructuring strategy.

“It is our hope that in the second half of the year, we will be able to sign on to the Staff Monitored Programme with IMF to buttress some of the reforms on the economic front.”

“(In) eighteen months, we should be able to get to a decision point to where we can start identifying a sponsor to assist in clearing our arrears with the World Bank, the AfDB and European Investment Bank, those are what we call preferred creditors.”

He did, however, indicate that some institutions have already expressed their agreement to participate.

Mthuli acknowledged that the debt arrears were a significant burden on the economy.

He pointed out that the country’s economic growth had averaged 6,8 percent over the past three years.

However, he believes that growth could be even higher, at around 8 percent, if the country was not burdened by these arrears.

“The arrears are an albatross around the Zimbabwean economy, we could be growing faster looking at the growth rate of 6,8 percent on average in the past three years (and) imagine if we did not have an albatross that growth could be higher, could be averaging 8 percent,” said Mthuli.-ebusinessweekly