Zimbabwe will adopt several economic and political reforms to reengage with international and bilateral creditors as growing arrears become an albatross stifling economic growth.
The country’s total public and publicly guaranteed external debt position is estimated at US$8bn as at end of June 2019. Of this, US$5.9bn constitutes accumulated arrears (74% of total external debt). Zimbabwe still owes the World Bank $1.3bn, AfDB US$680m and the European Investment Bank US$308m.
“The continuous accumulation of arrears remains a major setback on Zimbabwe’s development agenda, hence, the need for reengagement with international development partners for arrears clearance and debt relief. The clearance of the arrears to the Multilateral Development Banks, Paris Club, Non-Paris Club and other creditors requires a comprehensive and wellcoordinated approach,” reads the 2020 Pre-Budget Strategy Paper.
“As part of the roadmap to arrears clearance, Government signed a Staff Monitored Programme (SMP) with the International Monetary Fund (IMF) covering the period May 15, 2019 to March 15, 2020 with quarterly performance reviews.
“The SMP seeks to assist Zimbabwe implement key reforms, as outlined in the Transitional Stabilisation Programme (TSP), and build a track record of implementing sound economic policies as it seeks to normalise relations with the international community.
“Successful implementation of the SMP, in conjunction with reforms in the TSP, is key in the mobilisation of critical support from development partners for a comprehensive arrears clearance and debt relief programme. This will be critical for Zimbabwe to achieve private sector-led sustainable and balanced economic growth.”
In the international financial architecture, the IMF, the World Bank Group and the AfDB enjoy a preferred creditors’ status under a Pari Passu rule, which means their arrears have to be simultaneously cleared first before any other creditor could be considered for payment.
This makes it almost impossible for Zimbabwe to clear its international arrears without a payment plan approved and supported by countries such as the UK, USA and other Western nations.
Last year, IMF warned government that it could sink into a vicious debt trap as its stock of commercial loans soar.
With no budgetary support from multilateral and bilateral creditors, government shifted its focus on short term debt instruments like treasury bills and facilities from regional banks like the African Export- Import Bank. — Business Times