7 January 2014

Zimbabwe: World Bank Slams Door On Zim Support

THE World Bank has become the latest institution to pour cold water on Zimbabwe's bid to access fresh loans from international lenders, unless the country first clears its arrears.

Zimbabwe's external debt runs into billions of dollars and, last year, the country formally approached the World Bank for debt relief under the 'Highly Indebted Poor Countries' (HIPC) scheme.

However, the bank has since indicated that the country does not qualify for support and will need a comprehensive arrears clearance framework with the international community to qualify for fresh loans or further financial assistance.

"Zimbabwe's eligibility to receive assistance under the HIPC Initiative remains unclear," the World Bank said in its latest report.

"(The) Country could potentially be eligible for assistance if it meets end-2004 and end-2010 indebtedness criteria and if it clears its arrears to the (IMF's) Poverty Reduction and Growth Trust," the report further stated.

Tim Jones, policy manager at global lobby group Jubilee Debt Campaign said Zimbabwe was not automatically eligible for the "poor countries initiative".

"So a political decision has to be made over issues to do with the indebtedness criteria statistics has to be made for it to be considered for the scheme.

"There have been indications in the past from the World Bank and western governments that they will be willing to let Zimbabwe in but that was very much linked to political changes in the country," Jones said.

Jones added: "Following the July election result, it's hard to tell what's going to happen in future although we know that the Zanu PF government never wanted to go the highly-indebted poor countries route."

The World Bank funds humanitarian programmes in the country, particularly in the health sector.

Zimbabwe owes the IMF and the World Bank $124 million and $1 billion respectively.

In 2012, the IMF put Zimbabwe's external debt at $12.5 billion, with $6.7 billion in arrears.

Last year, former finance minister Tendai Biti signed up to IMF-monitored reforms in a bid to stabilise the economy and facilitate access to cheap multilateral finance.

"Going forward, sustaining high growth will require determined efforts at economic reform," IMF chief Christine Lagarde said at the launch of the IMF scheme.

"In this regard, the (IMF scheme) already envisages important reforms in public financial management, financial sector regulation, and other areas," Lagarde said.

But since ZANU PF took over from the coalition government, its commitment to the terms of this informal agreement has been questioned, with the IMF recently expressing concerns about the ballooning public sector wage bill. See here.

Almost six months since the regime came into power there are no signs of a clearly defined economic direction with the country experiencing a serious liquidity crunch, job losses, company closures and threats of industrial action from a disenchanted civil service.

On Monday, a local daily quoted asset management firm TFS as saying the absence of policy direction was affecting the performance of the country's stock exchange, which has so far recorded losses since it re-opened this year.

"The absence of concrete short-term measures to stimulate economic activity from the recently published 2014 National Budget also supports our view that the local market will continue to trade sideways," the firm said.

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