4 February 2013

Zimbabwe: Govt Engages European Bank Officials

OFFICIALS from the European Investment Bank last week held talks with the Ministry of Finance on the US$221 million the country owes the bank. While details of the talks could not be established, Finance Minister Tendai Biti said the EIB delegation discussed the Zimbabwe debt to the bank. The delegation arrived last Monday on a five-day visit during which they also met business people to discuss investment, funding opportunities and the possibility of extending credit to local banks.

"They are here because of the debt. A number of the people (from Europe) want to come (and invest) here. They (EIB delegation) met with Mr (Andrew) Bvumbe (head debt office, Ministry of Finance) and other officials in the debt office," said Minister Biti.

The EIB team comprised Rasmus Lauridsen (senior investment officer, responsible for Zimbabwe), Barbara Marchitto (senior economist responsible for the Sadc region) and Nathaniel Munetsi (business analyst for the Southern Africa region).

Zimbabwe National Chamber of Commerce president Mr Oswell Binha said captains of industry and commerce were set to meet the EIB officicials in light of the efforts by Government to re-engage and normalise relations with Europe.

The meeting explored ways in which the bank would assist industry and commerce, with particular emphasis on small-to-medium enterprises, using sector funding mechanisms gathered data on the country's funding needs. The debt, estimated to be around US$10,7 billion - according to the IMF - has been a major impediment to speedy economic recovery as it continues to block capital inflows for various infrastructure and economic programmes.

Last March, Minister Biti unveiled a debt resolution strategy in a bid to unlock external financing for economic development. The plan - Accelerated Arrears Clearance, Debt and Development Strategy - seeks ways to retire the country's debt overhang.

The strategy is a combination of old debt relief mechanisms, injection of capital by development partners, leveraging of natural resources and the removal of illegal sanctions imposed by Western countries. It involves stricter debt management through a debt management office, creation of database validation and reconciliation with all creditors, negotiating arrears' clearance and a relief plan.

It will also include re-engagement with the international community for normalisation of relations, removal of sanctions and leveraging resources.

Minister Biti said Zimbabwe could not deal with infrastructural challenges without funding and assistance from global financial institutions and bilateral partners. Zimbabwe's huge debt liability is largely a result of the country's economic instability over the decade to 2008, which constrained its capacity to repay.

Some of the institutions owed by Zimbabwe are the African Development Bank (US$529 million), World Bank (US$1,5 billion), the International Monetary Fund (US$550 million) and the European Investment Bank (US$221 million).

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