Golden Sibanda in VICTORIA FALLS
ZIMBABWE is in discussions with the International Monetary Fund, World Bank and African Development Bank for fresh financial support to rebuild capacity to repay the country’s debt, a Cabinet minister has said. Addressing parliamentarians during a pre-Budget seminar at Elephant Hills Hotel last Friday, Finance and Economic Development Minister Patrick Chinamasa said he made the request when he met the institutions’ executives during the annual IMF and World Bank meetings held recently in Washington, US.
He said he told leaders of multilateral lenders that their reluctance to provide financial assistance over arrears maintained or perpetuated the current economic crisis because the country had no capacity to clear its US$7 billion debt plus US$4 billion arrears.
The minister made the remarks after he was asked whether Zimbabwe’s debts could be pardoned under the Heavily Indebted Poor Countries Initiative and was told that the country does not qualify.
“They said Zimbabwe does not qualify and was actually in a better state (than other countries) given our debt to exports ratio. They said Zimbabwe did not qualify for debt forgiveness,” Minister Chinamasa said.
Multilateral institutions, particularly the Bretton Woods institutions, suspended financial help to Zimbabwe when the country defaulted on repayments in 1999 when it started experiencing an economic downturn.
He said because of its huge arrears and nominal debt overhang the multilateral lenders have been watching the country slide into an economic abyss instead of helping it rebuild its capacity to repay the debts.
While clearing its arrears is one of the conditions the country needs to meet under the IMF staff-monitored programme, a precursor to processes for normalisation of relations, there will be little progress on that front because the country has no funds to meet the obligations.
According to international standards qualification for debt forgiveness is determined by basic ratios – export to debt and debt to revenue.
However, Minister Chinamasa was satisfied with the engagements in Washington, which he described as positive and said further discussion will be held in meetings to be held before end of year.
Zimbabwe’s US$11 billion debt has been standing in the way of access to fresh funding as institutions that are owed have demanded that the country should clear its arrears first before getting fresh assistance.
The finance minister also said he was leaving no stone unturned in the quest to unlock external lines of credit, revealing that during the IMF/WB annual meetings in the US he held discussions with little-known Burma.
While Zimbabwe faces a myriad of constraints to economic growth, lack of access to affordable medium- term funding is the biggest problem. The country needs at least US$8 billion to get its economy kicking.
The country’s problems multiplied during the decade of recession from about 1998 to 2008, when half its gross domestic product dissipated.
Other challenges now include old and antiquated equipment resulting in inefficiency and lack of competitiveness, high cost of funding, shortage of electricity, high cost of labour, erratic water supply, low aggregate demand and competition from low-priced exports.
The net effect of that has been industry’s incapacity to compete with imports or just to produce to meet local demand, forcing the country to rely on imports, which totalled US$6,6 billion in the nine months to September 2013. Exports totalled a paltry US$2,3 billion in that period.