Zimbabwe lays out external debt repayment plan

Prof. Mthuli Ncube

FINANCE minister Mthuli Ncube is struggling to nail down the debt clearance roadmap which has been on the table since 2015 to clear urgent US$2,3 billion in arrears before securing game changing new funding, the Zimbabwe Independent can report.

Bridget Mananavire/Melody Chikono

Clearing the arrears is critical for the country to restore international funding, fresh lines of credit and restore confidence in the market, as well as to stabilise the financial services sector, particularly in view of currency volatility.

The plan, agreed in Lima, Peru, has been on-and-off over the past four years.

This week, Ncube hit a brick wall as he sought to build momentum in the implementation of the plan by visiting international financial institutions in Washington DC, United States.

Informed officials said Ncube will also be going to France today, where the Paris Club, an informal group of creditor nations whose objective is to find workable solutions to payment problems faced by indebted nations, meets. The Paris Club has 19 permanent members, including most of the western European and Scandinavian nations, the US, the United Kingdom and Japan. Its members meet every month in the French capital, except in February and August.

The country’s arrears amount to about US$5,6 billion; split between multilateral creditors (US$2,2 billion), the Paris Club (US$2,7 billion), and non-Paris Club creditors (US$700 million).

Ncube visited the World Bank this week to engage on Zimbabwe’s debt, which now stands at US$1,3 billion. He also visited the International Monetary Fund (IMF) and met with its managing director Christine Lagarde and senior officials at the African Department to discuss a Staff-Monitored Programme; an agreement between country authorities and IMF staff to monitor the implementation of economic reforms. Zimbabwe cleared its US$107,9 million debt to the IMF in 2016. The IMF said yesterday, as it did after meeting Ncube, it still does not have a financing programme with Zimbabwe, although talks are continuing.

Harare also owes the European Investment Bank US$308 million.

The US holds sway in the World Bank as the head of the institution is always from there, while the IMF is usually headed by a European Union national. Sources said Ncube also sought to engage members of the US Congress on the sanctions, but as he was flying there President Donald Trump was renewing the measures, saying Harare’s policies and actions continue to undermine the country’s democratic processes, institutions, economic recovery and pose “an extraordinary threat” to US foreign policy.

American embassy spokesperson Stacy Lomba told the Independent in an exclusive interview this week Washington DC would not support Ncube’s plan as it does not see any change in Zimbabwe yet.

“President Emmerson Mnangagwa’s administration has yet to implement the political and economic overhaul required to rebuild its reputation within the international community and improve its relationship with the United States. The United States remains seriously concerned about ongoing human rights abuses in Zimbabwe,” Lomba said.

“Most recently, we condemned the excessive use of force by Government of Zimbabwe security forces since mid-January, which resulted in at least 13 deaths, 600 victims of violence, torture or rape, and more than 1 100 arrests. The Government of Zimbabwe’s use of violence against its citizens betrays promises to create a new Zimbabwe. We reiterate our call for the Government of Zimbabwe to enact promised political and economic reforms. As we have stated before, our engagement will be based on implementation of those reforms.”

Meanwhile, in Harare the African Development Bank (AfDB) — which is owned US$680 million by Zimbabwe — told the Independent that while government had on several occasions made promises to settle the debt before further assurances to table a repayment plan, a proposal was yet to be delivered.

In 2018, Ncube said Zimbabwe planned to clear its arrears with the AfDB and World Bank by September this year. However, obstacles lie ahead. In March last year, AfDB country manager Damoni Kitabire told this publication that the bank received assurance that government would settle the debt between June and October 2018. That did not happen.

After failing to settle the arrears, Zimbabwe later promised to present a plan in November 2018 instead. The plan did not materialise.
Kitabire this week told the Independent that a meeting between government and AfDB last week in Harare ended with yet another promise that government would soon present the long-awaited plan.

“We are still waiting of the government to give their position on the debt clearance. It’s true they had promised to submit a plan by November last year but they failed. We met with the government last week and they said they were finalising the document. Maybe it will take two or three weeks,” he said.

Kitabire said the AfDB had made it clear to government that it had to draft an inclusive plan for all preferred creditors: the IMF, World Bank and the African institution.

“We said we wouldn’t go alone. They should do a comprehensive plan; they cannot sort us alone, while leaving others, as we are in this together. What Zimbabwe owes the World Bank and other institutions is a huge sum which it cannot just wake up and clear it in one day. It needs every effort of all stakeholders to put their heads together. Zimbabwe needs a co-ordinated approach towards debt clearance,” he said.

Lomba said the US would not support any debt recovery plan by Zimbabwe without reforms demanded in the Zimbabwe Democracy and Economic Amendment Act (Zidera) — the red flag on Ncube’s path.

“The Zimbabwe Democracy and Economic Recovery Amendment Act of 2018 outlines the steps Zimbabwe needs to take to gain the support of the United States Government for new lending through the international financial institutions. The key conditions the United States requires Zimbabwe to satisfy remain the same. These include: 1) the restoration of the rule of law; 2) free and fair elections; 3) equitable, legal, and transparent land reform; and 4) military and national police subordinate to civil government,” said Lomba.

Reports yesterday said Zimbabwe, through its Foreign Affairs ministry, has reached an agreement with a US public relations firm and will pay US$500 000 a year in a bid to clean up its image and revamp its repuation.

According to the two-year contract entered into between Foreign Affairs minister Sibusiso Moyo and Ballard Partners, the firm shall advocate for Zimbabwe before the Federal government and “encourage a re-examination of Zimbabwe by the State Department, with a view to establishing the best possible bilateral relationship with the United States and facilitating the restoration of Zimbabwe’s membership in good standing in the community of nations, including permitting Zimbabwe the opportunity for unhindered participation in international financial institutions and other relevant international organisations”.

Europeans have also maintained the limited remaining sanctions on Zimbabwe, calling on Mnangagwa and his government to implement reforms first.

In order to position Zimbabwe for new credit lines and international financial support, Ncube last year announced a cocktail of austerity measures to contain government’s unrestrained expenditure outlays and resultant fiscal deficit seen surging towards US$2,9 billion this year-end.

The move was designed to extricate the country from a worsening fiscal crisis and enable it to clear its external debts.

Ncube last year had crucial meetings in Bali, Indonesia, with co-operating partners and international financial institutions who emphasised the need to consistently implement the measures as outlined in the Transnational Stabilisation Programme (TSP).

However, the minister is struggling to implement most of the reforms in the TSP as they hinge on politics, economic environment and the country’s capacity to clear its debt and arrears. Zimbabwe’s public debt is US$17,69 billion. – Zimbabwe Independent