19 December 2012

Zimbabwe: World Bank to Resume Zim Funding

THE World Bank (WB) is working on a plan that could see it resuming funding to Harare during 2013, government sources and officials with the Bretton Woods institution said this week.

The WB halted lending to Harare in 2001 after arrears swelled to unprecedented levels as Harare drifted into a volatile political and economic crisis that triggered hyper-inflation and capital flight at the turn of the century.

But the WB's relations with Zimbabwe have been improving since 2009 when efforts to implement an arrears clearance strategy were initiated.

After a series of indications that the bank was happy with the debt strategy put in place by Finance Minister Tendai Biti, The Financial Gazette's Companies & Markets (C&M) can reveal that a report on Zimbabwe will be tabled at the WB in January 2013.

Sources said they were confident that discussions on Zimbabwe next month would at least see the country benefiting from an IDA Pre-arrears Clearance Grant.

The development comes amid reports the United States of America was reconsidering the Zimbabwe Democracy the Economic Recovery Act, a law that has been used to bar Washington and its industries from economic relations with Harare.

"I am confident that the Zimbabwe issue is going to be tabled at the WB in January for things to normalise," a World Bank source told C&M this week.

Another source, who has worked with the WB in Zimbabwe, added: "It is very positive, the market will like it. They are seriously looking into Zimbabwe.

"We cannot rule out disbursements next year, but there will be some conditions. Remember we are going into an election."

In July, the WB said Zimbabwe's debt settlement strategy was satisfactory.

Addressing a Confederation of Zimbabwe Industries conference in Nyanga, WB country manager, Mungai Lenneiye, hinted that the institution could reconsider funding some programmes in Zimbabwe but did not give details.

"We think the Minister of Finance has so far put in place in terms of debt payments reasonable (measures)," Lenneiye said.

"We think in the new year, the process of lending could begin," Lenneiye indicated.

He was not available for comment this week.

Zimbabwe, which is expected to hold elections next year, is in debt distress.

At the end of 2011, its total external debt was estimated at 84 percent of Gross Domestic Product, of which 65 percent was in arrears.

"The country's overdue obligations include the World Bank, US$911 million, AfDB (African Development Bank), US$587 million, EIB, US$244 million and the International Monetary Fund, US$138 million," the WB said in a new report on Zimbabwe last week.

"While the domestic public debt, estimated at US$507 million remains a comparatively small component of the total debt, it also represents another source of vulnerability. The sensitivity analysis points to possible further worsening of the debt situation," it added.

Lack of critical external funding has triggered widespread social decay in Zimbabwe.

Mortality rates hit high levels and life expectancy at birth plunged to 44 years in 2008.

The WB said under five infant mortality remained high at 84 per 1 000, despite a notable decline from the 2009 estimate of 67 per 1 000.

"There is a widening gap in access to services, while a strong rural-urban divided has developed.

"These trends extend to other critical indicators thereby confirming added challenges posed by a weakened health system on rural and poor households," the WB report added.

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