Busan — The African Development Bank (AfDB) will work with its partners to see Zimbabwe roar back in a major boost for the economy, which is desperate for foreign capital.
AfDB president Akinwumi Adesina said Zimbabwe was hamstrung by a shortage of foreign currency and the group had provided funding to CABS for on-lending to small and medium size enterprises.
“Zimbabwe is a very important shareholder of this bank. We would like to work with all our partners to see Zimbabwe roaring back. That is very important for the Sadc economy.
“That is important for the people of Zimbabwe,” Adesina said in response to questions from Standardbusiness at a media briefing to mark the end of the 2018 AfDB annual meetings on Friday.
He said Zimbabwe had the capacity for industrial development but it had been difficult for companies to access foreign currency.
“When it comes to industrial development, Zimbabwe has the capacity but because of the challenges of the sanctions and things like that over time, it has been difficult for the companies to access foreign exchange,” Adesina said.
“One thing we did practically from the African Development Bank is that we have provided millions of dollars to CABS to provide loans to small and medium size enterprises in Zimbabwe so that they can import equipment and machinery they need to continue to drive it.”
In March, the AfDB advanced a $25 million trade finance line of credit to CABS for on-lending to the productive sector of the economy.
The line of credit has a tenure of three and a half years and comes at a time local banks have not been providing long-term financing due to the short-term nature of deposits.
Foreign currency shortages have been listed as one of the drawbacks to the growth of the manufacturing sector with capacity utilisation decelerating to 45,1% last year from 47,4% in 2016, according to the Confederation of Zimbabwe Industries report on the state of the sector.
Zimbabwe cannot access cheap funding from foreign multilateral institutions due to the country’s debt overhang. Zimbabwe basically owes everyone north, south, east and west and has been struggling to clear its debt with lenders such as AfDB and the world.
In 2015, Zimbabwe presented a debt resolution strategy at the World Bank/International Monetary Fund [IMF] annual meetings in Lima, Peru. The plan included the settling of the combined $1,8 billion debt to AfDB, IMF and World Bank by June 2016. The country has so far managed to settle only the IMF obligations.
Adesina said AfDB was working with IMF and the World Bank for a debt resolution.
“We are committed to working with our partners on getting a resolution to this with the government,” he said.
“Our partners in this are the World Bank and IMF. I see it positively turn around in these discussions.”
Zimbabwe owes AfDB $623 million and $1,1 billion to the World Bank. In his 2018 national budget presentation, Finance minister Patrick Chinamasa said government would pursue the re-engagement process with international financial institutions, in particular the World Bank, AfDB and the European Investment Bank to unlock external new financing required by productive sectors.
This, Chinamasa said, would support the new economic order thrust which required complementary support from development partners, access to external borrowings, as well as resource inflows into the economy.
Meanwhile, the 53rd AfDB annual meeting ended here on Friday with a call for countries to take a lead in industrialisation, one of the five pillars AfDB is driving under the tenure of Adesina.
Other priority areas are feed Africa, integrate Africa, light up and power Africa and improve the quality of life for the people on the continent.
The bank’s governors were impressed by the institution’s turnaround and wanted AfDB to do more for Africa, Adesina said, adding it had constituted a committee to look at the capital increase of the institution.
He said the industrialisation of the continent would be anchored on its resources through value addition.