Zimbabwe pays off IMF arrears

Enacy Mapakame Business Correspondent

Zimbabwe has cleared its arrears with the International Monetary Fund as part of efforts to settle its overdue financial obligations to the multilateral institution.This is a milestone in the country’s endeavour to attract fresh capital.

The IMF said Zimbabwe, which had been in arrears since 2001, last Thursday settled its obligations, amounting to $107,9 million to the IMF’s Poverty Reduction and Growth Trust.

The IMF said Zimbabwe transferred part of its SDR holdings kept at the IMF to the PRGT account to clear the arrears.

“Zimbabwe is now current on all its financial obligations to the IMF,” said IMF communications director Mr Gerry Rice in a statement.

In his Mid-Term Monetary Policy Statement presented last month, Reserve Bank of Zimbabwe Governor Dr John Mangudya indicated significant progress had been made towards the re-engagement process to clear the country’s external debt arrears with multilateral financial institutions.

Indications were that Zimbabwe would have cleared arrears by year end.

“Significant work has been recorded to ensure that the country clears its arrears by 31 December 2016. It is critical to note that it is Zimbabwe that owes multilateral and bilateral creditors and not vice versa,” he said.

As at September 2016, the country’s arrears to the IFIs totalled $1,8 billion. Of this, the IMF accounted for $110 million, AfDB- $601 million, IDA- $218 million and IBRD at $896 million.

Dr Mangudya could not be reached for comment as he is away on business in Germany.

External debt arrears clearance will improve Zimbabwe’s country risk premium through reducing its debt overhang.

This will also enhance the country’s access to foreign finance.

Economist Dr Gift Mugano said although Zimbabwe still needs to meet financial obligations with other MFIs such as the World Bank and the African Development Bank, this was a step in the right direction.

“The issue of debt overhang has been serious and our relations with these institutions have been bad because of that,” said Dr Mugano.

“The IMF and WB are like international ‘commissioners of oath’ in business confidence and if we do not pay them they can give us a tag which is bad and difficult to shake off,” he said.

He added, under normal circumstances, the country should be getting fresh capital from the IMF.

However, the multilateral lender does not operate in isolation, said Dr Mugano, as it is still controlled by the world’s super powers with significant voting rights and bias against Zimbabwe.

“It is not a straight jacket,” he said.

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  • Tapfumaneyi

    Zimbabwe has virtually exhausted if original maximum SDR of $500 million permitted by the IMF seven years ago, a lifeline facility designed to help nations who experience a temporary shortfall in foreign exchange reserve assets. By using $107,9 million of only $130 million SDR remaining since last year, that’s another IMF debt of $500 million that must be repayed sometime in the future. Juggling debts by moving them from one pocket to another, won’t make the multinational lenders forget about Zimbabwe’s outstanding total $10 billion foreign debt, nor can seeking another Afreximbank loan of $1 billion to help clear payment arrears to other multinational institutions be considered as a long term solution, as long as Zimbabwe’s massive trade deficit continues exacerbated by trade figures of double imports compared to exports.
    Meanwhile Governor Mangudya is currently in Germany, trying to convince printer Giesecke and Devrient with branches all over the world to risk its global reputation and $2,2 billion business, and reconsider after rejecting the offer to print Bond Notes backed by a dodgy Afreximbank $200 million facility kept secret. Despite RBZ legal obligations, it refuses to reveal the Afreximbank terms to Parliament for an obligatory new law which must gain parliamentary approval before authorising the issue of bond notes.

  • Rangarirai

    Wonder why Dr Mangudya went all the way to Germany to plead with Giesecke & Devrient head office to reconsider after they declined to print the Bond Note to safeguard their reputation? They have offices all over the world with a GDSAF regional office located in Johannesburg South Africa staffed by a competent 120 professional collaborators, a far cheaper and pro-indigenous trip, or is African based customer confidentiality less worthy than European offices?

  • ian

    Prof Muzvinavhu- this sets the record straight! We have not been able to secure loans from IMF all along due to the arrears problem and not that someone has been vetoing our requests for funds. Since we are on a clean slate now, we can now start seeking new funds from IMF!