Zimbabwe’s debt and arrears clearance hinges on outstanding reforms
Zimbabwe’s arrears and debt clearance process hinges on the Government’s commitment to implement key reforms required to conclude the process.
In December 2022, the Government of Zimbabwe launched a structured platform for dialogue on arrears clearance having been debt-ridden for over two decades, constraining the country’s ability to pursue development initiatives.
Implementation of the debt reforms is being spearheaded by the sector working group’s (SWG) tasked with focusing discussions on the Government’s implementation of reforms under the three key strategic pillars.
These include economic growth and stability reforms; governance reforms and land tenure reforms; compensation for former farm owners (FFOs) and the resolution of bilateral investment protection and promotion agreements (BIPPAs).
Prof Mthuli
However, key issues of concern remain the Private Voluntary Organisations Act1 (PVO), which provides for the registration of private voluntary organisations and the regulation of donations that such organisations receive, governance issues, land tenure and farmer compensation, among other reforms.
While significant progress has been made on economic reforms and land tenure and compensation of former farmers, the outstanding reforms are required.
High level facilitator, former President of the Republic of Mozambique, Joachim Chissano, said in a virtual speech he delivered during the high-level structured dialogue meeting in Harare on Monday that the overall strategic goal of the dialogue has been re-engagement and that objective has been achieved as a dialogue between the Government and its developing partners and creditors has taken root.
He said the engagement has provided for a fair and open discussion on critical issues and reforms that can propel Zimbabwe through arrears clearance and debt resolution.
“Governance reforms are grown from National Development Strategy 1 (NDS1) and are focused in six areas, namely enhanced justice delivery, public sector transparency and accountability, combating corruption, promotion of human rights, electoral reforms and national stability, peace and security.
“16 sub-indicators have been chosen with the measurement of performance to remain based on three internationally recognised standards adopted to integrate the Ibrahim Index of African Governance (IIAG), the rule of law index and the corruption perception index.
“Measurement made this year points to mixed results with the trajectory, registering a setback as six sub-indicators recorded a positive performance while nine had a negative one. Further work is needed to reverse this outcome,” he said.
Former President Chissano said progress achieved so far is remarkable; however, there are other challenges that remain to be addressed.
“We would like to advise the Government of Zimbabwe to enhance coordination of the dialogue process on the three pillars to ensure speedy implementation of reforms and commitments made. On the other hand, there is a need for you to evaluate why nine subsectors registered a negative measurement this year and what needs to be done to reverse this negative assessment,” he said.
He added: “We would like to recommend in particular that the PVO bill be subjected to further engagement with civil society organisations with issues ensuring that the consensus of all stakeholders is duly considered.”
Zimbabwe’s total public debt is estimated at US$21 billion as of June 2024, with external debt at US$12,3 billion, while domestic debt amounts to US$8,7 billion.
“External debt is owed to bilateral and multilateral creditors, with the latter accounting for US$3,1 billion. Out of this multilateral debt, $681 million is owed to the African Development Bank, $1.5 billion to the World Bank and $ 427 million to the European Investment Bank.
To anchor implementation of further economic reforms under the Arrears Clearance and Debt Resolution Process, the Government is currently negotiating an Staff Monitored Programme with the IMF.
SMPs are informal arrangements between national authorities and IMF staff to monitor the authorities’ economic programme that can help a country establish a track record of policy implementation.
African Development Bank (AfDB) president, Dr Akinwumi Adesina, the champion of the debt process, said it is critical to make sure all key deliverables are finalised for the success of the process.
He said key issues remained on the PVOs Bill and farmer compensation, adding that the IMF Staff Monitoring Programme expected in January next year would provide benchmarks.
“It is my hope and expectation that our seventh meeting will be on the conclusion of the arrears’ clearance and debt resolution. Let me state that we now need to collectively agree on a time-bound conflict plan to deliver the arrears clearance and debt resolution,” he said.
He noted that the African Development Bank, through the African Legal Support Facility, has supported the engagement of a sovereign advisory firm to develop a fit-for-purpose arrears clearance and debt resolution action and timeline.
Finance, Economic Development, and Investment Promotion Minister, Professor Mthuli Ncube, says the Government is targeting to have completed the SMP programme next year before the end of National Development Strategy 1 (NDS1).
“Next year, there are three important dates to take note of.
“In January we will put the SMP programme in motion, in July we will review the progress, and in September we take stock again and make adjustments.
“The aim is to complete the SMP programme before the end of the NDS1 period so that when we start with NDS2, we have no issues. I want to be free from debt,” he said.
Professor Mthuli said Africa and Zimbabwe in particular need concessionary and long-term funding in order to achieve inclusive growth.
NDS2 (2026-2030) is a successor to NDS1 (2021-2025), which comes to an end next year and has its main objectives of transforming the country into a middle-income economy by 2030.
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