GOVERNMENT has accelerated efforts of clearing its US$1,8 billion arrears with the World Bank and African Development Bank (AfDB) with a view to unlocking new funds.

Zimbabwe owes the World Bank US$1,2 billion while the AfDB is owed US$605 million.

There is a plan to harmonise the settlement of the arrears to the multi-lateral lending institutions.

The arrears clearance strategy is tied to Government’s re-engagement programme with the rest of the world, which started in November last year when President Emmerson Mnangagwa was sworn-in.

The Zanu-PF manifesto for the July 30 polls also talks about “mending strained international relations, strengthening existing and creating new friendships (and) re-engaging international creditors”.

Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya told The Sunday Mail Business last week that Zimbabwe remains alive to its international obligations with creditors and is working flat-out to pay.

“The Government has increased the pace of re-engagement. We know about our arrears to the World Bank and AfDB,” said Dr Mangudya.

“We are working on those ones in such a manner that we want to synchronise the two institutions (World Bank and AfDB) and the EIB (European Investment Bank).

“They need to be synchronised in the short-term. So it is good work in progress, we are making good progress on the two fronts.”

The EIB is the European Union’s non-profit long-term lending institution established in 1958 under the Treaty of Rome.

It is based in Kirchberg, Luxembourg.

Dr Mangudya said once the AfDB arrears are cleared, the country will seek bridge finance whereby the Abidjan, Cote d’Ivoire, head-quartered financial institution will extend a US$500 million grant under the Arrears Clearance Window (Pillar II) of the Fragile States Facility.

“It means our net payment will be around US$120 million (to AfDB). So what we are trying to do is to find the best way of paying which is a least cost to Zimbabwe to ensure debt sustainability and ensure that when we pay, we also get new inflows from those institutions.

“Those are the negotiations we are having,” said Dr Mangudya.

Due to economic challenges in the last two decades, the country has been struggling to clear its arrears.

Zimbabwe’s arrears with the AfDB have been rising from US$561 million as at July 2010 to the current US$605 million.

A previous report compiled by the AfDB suggested that Zimbabwe was the “most likely” country to benefit from the Fragile States Facility (Pillar II) operations in the African Development Fund-12, compared to other countries in protracted arrears such as Somalia and Sudan.

Zimbabwe’s debt clearance plan is in tandem with the strategy adopted in Lima, Peru, in 2015.

In October 2016, Zimbabwe cleared its US$108 million arrears with the International Monetary Fund’s Poverty Reduction and Growth Trust.

The country had been in arrears since 2001.