Harare – Minister of Finance and Economic Development, Professor Mthuli Ncube remains optimistic that the country is on course to clear its huge chunk in debt, which is prerequisite for the country to start accessing new funding, this is despite economic developments proving otherwise.
Zimbabwe has debt amounting to over $18 billion, half of which is owed to international creditors such as the World Bank and the AfDB. Zimbabwe owes AfDB about $610 million, over $1,16 billion to the World Bank and $212 million to the European Investment Bank.
The country’s external debt accelerated to higher figures since adopting a hard currency regime in 2009 when external debt amounted to $6,1 billion at the close of that year.
Speaking to Business Weekly on Thursday, Ncube said that debt clearance plan is right on course tied to economic reforms anchored on the government’s vision to lead Zimbabwe towards attaining Upper Middle-Income status by 2030.
However, the ongoing economic recession, coupled with social and political unrest has proved to be the major hurdle to government’s plan to revive the economy.
Just recently, the debt clearance plan hit a major brickwall after Britain, which has been doing the bidding for Zimbabwe’s international reengagement and debt clearance, said it can no longer continue supporting the new administration after reports of human rights abuses
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.
“We just need to work harder to make sure that we access the bridging resources for that,” Ncube was quoted as saying.
“In terms of the bridging resources themselves, of course we are having conversations with the creditors themselves because that is where we can get the cheapest funding.”
The country’s struggles to access credit lines can be a reflection of loss of confidence, which is not only stemming from the wider Western level, but also on continental level.
Last month, South Africa’s treasury said that it declined Zimbabwe’s request to borrow $1.2 billion further putting the country’s hopes of an economic revival in tatters.
Since coming into power of the President Mnangagwa led administration, the economic situation has seen no significant upturn, from the ruins of former president Robert Mugabe. Instead the nation is experiencing major foreign currency shortages, fuel is in short supply, spiking inflation, strikes and a dearth of political leadership.
The new administration has been quite vocal about its commitment to clear its debt arrears. In 2016, the country paid off 15 years’ worth of arrears to the International Monetary Fund.
It remains to be seen how the government will manage to clear the outstanding arrears, considering among others lost chances of rejoining the Commonwealth for which success could be key to unlock assistance with debt clearance.
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