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Business Reporter
ZIMBABWE’S external debt will hit $7,2 billion by December this year, according to Government projections.
Presenting the Mid-Term Review Statement to Parliament yesterday, Finance and Economic Development Minister Patrick Chinamasa said debt distress has continued to undermine the economy’s capacity to meet debt servicing obligations, resulting in the accumulation of external payment arrears since 2000.
Minister Chinamasa will submit to Cabinet the Debt Strategy roadmap for its consideration and approval in the coming fortnight.

He said Zimbabwe is saddled with an unsustainable external debt overhang amounting to $8,8 billion as at end of June.
According to Minister Chinamasa, public and publicly guaranteed debt accounts for $6,9 billion — 51 percent of GDP. Private sector debt, which is, however, being fully serviced, totals $1,9 billion. Of the $6,9 billion public debt, $5,5 billion are arrears, with the balance being penalty interest and other charges.

“In dealing with our debt distress it is unavoidable that we go through with the implementation of a comprehensive Zimbabwe Accelerated Arrears Clearance Debt and Development Strategy,” said Mr Chinamasa.

The implementation of the debt relief strategy will entail the removal of sanctions imposed by the US and the European Union which have had a debilitating effect on the economy.

“In this regard, it will be important for the Government to continue engaging the international community, and more specifically lobby the EU to unconditionally remove the sanctions and the US to repeal ZIDERA,” said Minister Chinamasa.

Zim-Asset has provided an important anchor for policy reforms under the continued implementation of the Staff-Monitored Programme with IMF, according to Minister Chinamasa.

He said it will be important for Zimbabwe to negotiate a successor SMP after the expected successful conclusion of the third review of the existing SMP this month.
An IMF Review Mission will be in the country from September 17 to October. The debt relief strategy will also entail negotiating for significant debt relief with the major Paris Club creditors as well as stepping up re-engagement with all the other non-Paris Club creditors.

“As Zimbabwe negotiates for debt relief, it will be important for the country to honour its obligations to co-operating partners. In some cases, making token regular payments will suffice to demonstrate Zimbabwe’s commitment to its obligations, instilling confidence and good faith with creditors,” said Minister Chinamasa.

The Government has assumed the Reserve Bank debt which arose from the bank’s quasi fiscal activities. The Debt Assumption Bill which seeks to provide the legal framework for the assumption of this debt by Government has since been drafted and is currently before Parliament.

The validation and reconciliation of the debt by the Zimbabwe Aid & Debt Management Office is on-going. The amount of validated Reserve Bank debt as at end July 2014 is $200,4 million.

Government has already begun making regular monthly payments towards servicing arrears to the IMF Poverty Reduction and Growth Trust, as well as quarterly payments to the World Bank and the ADB.

Payments towards servicing arrears to the IMF amount to $150 000 monthly, with a cumulative total of $900 000 having been paid during the first six months of 2014.

During the same period, quarterly payments of $900 000 and $500 000 were also made to the World Bank and ADB, amounting to $1,8 million and $1 million, respectively.

As a way of normalising relations, Government will also start making token payments to the European Investment Bank, whose debt amounts to $314 million, of which $238 million are arrears.