8 February 2019

Zimbabwe: Zim On Course to Clear Debts

Photo: The Herald
Finance and Economic Development Minister Professor Mthuli Ncube

Zimbabwe is on course to clear obligations to international financial institutions (IFIs), with the Government already in talks with creditors over bridging finance to settle the debts, Finance and Economic Development Minister Professor Mthuli Ncube has said.

Prof Ncube said this in an interview on the sidelines of his presentation to students of Defence Course Intake 7 of 2018, at the Zimbabwe National Defence University in Mazowe.

He said the arrears clearance plan was tied to economic reforms, which are anchoring President Mnangagwa's administration as he seeks to lead Zimbabwe towards attaining Upper Middle Income status by 2030.

"We just need to work harder to make sure that we access the bridging resources for that," said Prof Ncube.

"In terms of the bridging resources themselves, of course we are having conversations with the creditors themselves because that is where we can get the cheapest funding.

"The cheapest funding you can ever get is from themselves (the World Bank, IMF and African Development Bank) and there are mechanisms through which this can be done and we are working on that; we are having a conversation on that."

Talks for bridging finance can take up to a year, said Prof Ncube, which requires that in the interim, the country should stick to other means of survival.

Zimbabwe's arrears to the African Development Bank (AfDB) are $610 million, over $1,16 billion to the World Bank and $212 million to the European Investment Bank.

The arrears have to be settled with all the multilateral financial institutions for Zimbabwe to start accessing funds from them.

Prof Ncube said the first step to solving the arrears issue was economic reforms, which started off with the crafting and launching of the Transitional Stabilisation Programme (TSP).

The TSP has been widely accepted by the creditors and foreign governments as a "credible document".

Prof Ncube said the issue now was the implementation of the TSP, "and the first test is really through the Budget, that is your implementation instrument and also resource allocation".

"The Budget was passed by Senate on the 29th (of January) so that process is complete. We are now going into the implementation phase for the next few months and that's when we will show the track record in walking the talk on our economic reform agenda.

"I must say that from where we sit as Government (and) as Treasury, the path is still clear, we are carrying on with the reform agenda because if you think about it, what's beginning to happen is that we are beginning to really experience some of the pain without completing the reform agenda.

"So it is important to complete (the reforms) so that the pain is then worth the investment."

Prof Ncube said they were working closer with the World Bank, IMF and the AfDB.

A team from the World Bank has already visited Harare while an IMF team is currently in the country.

Officials from the AfDB are expected in March to speak about the arrears clearance plan.

". . . in terms of interacting with the institutions, the arrears clearance road map involves closer working relationships with the IMF, World Bank and the African Development Bank.

"As I speak, this week they (IMF team) are visiting Zimbabwe, I just met them before I came to speak here, at the (National) Defence College (University) and we have been very open, very transparent, very constructive in our conversations about our reform agenda (and) where the economy is headed.

"All that is part of the arrears clearance road map, you cannot get to the road map without talking to the three institutions, so arrears clearance, is part of the road map."

Phase three of the arrears clearance will see conversations being deepened with the multilateral lenders.

Said Prof Ncube: "So my view is that we are on track. Of course, it doesn't mean that any turbulence we face in the country, does not tamper with our plan.

"When you are piloting an aircraft, when you are going through turbulence you must work harder to keep on course because sometimes it feels like, but you need to keep focus on the destination, and they (creditors) are very supportive of us, in getting to that destination.

"Equally, those that we owe money are equally supportive, so we are on course."

He emphasised that it was imperative that Government stayed on course regards the reform agenda as it was a "package", together with the arrears clearance plan.

Zimbabwe has failed to access a lot of credit lines because of failure to settle its arrears with the World Bank.

Prof Ncube said each time local banks try to borrow; they fail to get money directly unless they got a Government guarantee.

Local bank's inability to obtain lines of credit directly limits the quantum of funds to support the productive sector.

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