ZIMBABWE has met all the conditions precedent to the repayment of debt arrears to the World Bank and the African Development Bank (AfDB), Finance and Economic Development Minister Patrick Chinamasa has said.
In an update on the country’s re-engagement programme with the international finance bodies, he said clearing foreign debt was crucial in addressing country risk and attracting fresh lines of credit to oil economic growth.
The positive development comes after the country successfully settled its $107 million arrears to the International Monetary Fund (IMF) on October 20, 2016. The AfDB and World Bank are both owed a combined $1.7 billion while the country also owes other multilateral institutions, bilateral official lenders and external private creditors.
“The terms and conditions of the facilities that the Reserve Bank of Zimbabwe has put in place to repay the debt arrears to the World Bank and AfDB have been scrutinised and adjudged by the affected International Financial Institutions (IFIs) and found to be reflective of current market conditions with financing terms similar to market transactions recently concluded by several sub-Saharan African countries during 2016 and 2017,” said Minister Chinamasa.
“It is on this basis that Zimbabwe can now proceed to repay its debt arrears. Clearance of debt arrears is expected to attract in the short to medium and long term foreign and domestic investment, given perceptions of lower country risk, and would be expected to open the door to foreign finance inflows and possible debt treatment by the Paris Club and non Paris Club Bilateral Creditors through an IMF financing programme.”
As agreed in Lima, Peru in 2015, the minister said clearance of debt arrears was buttressed by the country’s economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset) as clearly articulated by President Mugabe and in the 10-Point Plan.
The latter includes ease of doing business reforms meant to improve the investment climate, containing the fiscal and current account deficits and organisation of state owned enterprises.
“Building on the above positive developments, Government is dedicated to clearing the debt arrears to the World Bank and the AfDB on a simultaneity basis after completion of the exercise, which it is undertaking to evaluate the future flows from IFIs and other cooperating partners and financial institutions.
“This sequencing process is essential for debt sustainability by ensuring that there is no significant lapse of time between the settlement of the remaining debt arrears to the IFIs and the unlocking of future flows of capital that is necessary for sustained socio-economic transformation and eradication of poverty in Zimbabwe.”