Monday 19 August 2019


Zimbabwe will borrow US$1,9 billion from the Group of 7 industrialised nations to clear debts to the African Development Bank (AfDB) and World Bank, Finance and Economic Development Minister Mthuli Ncube said.

The Group of Seven or G7 wealthy nations is made up of France, Italy, Canada, Germany, United States, Japan and United Kingdom.

Clearing its position with these multilateral lenders is key for Zimbabwe as it will open avenues for fresh concessional funding to support its external position, which has chiefly been the reason for runaway inflation.

Zimbabwe imported US$6,3 billion worth of goods from international suppliers in 2018, down 1,9 percent since 2014, but up 26,1 percent from 2017 to 2018 while the country shipped US$4 billion around the world in the same period. 

Minister Ncube said immediately after clearing its liabilities to the multilateral financial institutions, Zimbabwe would seek US$1 billion package from the two lenders to repay the G7 debt.

Minister Ncube revealed this in an interview with Bloomberg news last week during which he also said Harare expected the Paris Club, whom it owes US$2,8 billion, to forgive part of the debt.

But Zimbabwe must first complete a staff monitored programme with the IMF to restore sound and sustainable macro-economic fundamentals to be in good standing for fresh credit.

On the pari passu rule, Zimbabwe cannot get fresh credit from any of IMF, AfDB and WB if it has overdue arrears with any one of the institutions. This also explains why Harare still cannot get credit from IMF despite clearing its US$110 arrears to the global lender. 

Zimbabwe’s total external public and publicly guaranteed debt stands at approximately US$8,5 billion; as at the end of June 2019, Minister Ncube said.

In terms of the breakdown, multilateral institutions are owed a total of US$2,5 billion, of which the World Bank is owed US$1,5 billion, African Development Bank US$702 million, European Investment Bank US$309 million and other multilaterals US$74 million.

As at the end of June 2019, Zimbabwe’s total bilateral debt amounted to US$5,5 billion, with Paris Club creditors accounting for US$3,5 billion and non-Paris Club US$1,6 billion.

Clearing debts to the IMF, WB and AfDB is of utmost importance given that other key global lenders take cues from the positions of these leading multilateral lenders, making it difficult for defaulting borrowers to secure fresh credit from anyone without their support.

As part of efforts to rebalance the economy, Minister Ncube embarked on reforms that have thus far seen drastic reduction in budget deficits; in fact, Treasury says it is posting primary surpluses. In April, the current account was in positive position; a first in many years.

However, reforms that included liberalisation of the exchange rate regime, fuel procurement, introduction of mono and local currency, banning of the multi-currency and money transfer tax to boost state revenues, have spawned a wild price run that saw inflation jump from 5,39 percent in September last year to 176 by June 2019. 

But the Treasury chief, who once hinted that he was done with major austerity interventions that have spawned some hardships as he works to stabilise the economy, said “economic pain” would continue until at least end of this year.

Minister Ncube said, when he presented the MidTerm Budget Review Statement on August 1, 2019 that the economy, which he had projected to expand by 3,1 percent in the 2019 budget late last year, will not grow but contract by about 2 percent this year.

However, the Treasury chief said while prospects for growth this year were dim, after the economy was thrown off balance by a series of interventions to correct the ills of the past as well as the effects of drought and natural disasters, it was now on a stronger footing to support growth moving forward.

“The big macro-economic decisions should be complete by year-end,” Minister Ncube (55) said in an interview at his office in central Harare.

“In December, everything stops in terms of the big decisions. Beyond that, we focus more on jobs, growth, productivity and development.” Herald


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