Ministry of Finance and Economic Development Permanent Secretary (non-accounting) and newly appointed African Development Bank (AFDB) Executive Director, Judith Kateera, says government now prefers concessional funding to commercial loans as it hastens its external debts clearance efforts and developmental agenda.
Keteera will commence her duties as executive director in August.
Concessional funding relates to loans that are extended on terms substantially more generous than commercial loans, with the accommodation being achieved either through interest rates below those available on the market or by grace periods or a combination of both.
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.
Zimbabwe will currently not borrow externally and will cut reliance on the central bank to finance deficits during the IMF staff-monitored programme in a bid to set a track record of fiscal discipline that could earn it future funding.
Kateera whose new appointment at the AFDB involves advising and guiding governments in terms of economic and financial policies, and implementation of bank-funded projects and programmes, told businessdigest on Tuesday that it was critical for all low income countries to consider concessional funding especially for development projects to reduce pressure on the fiscus.
Kateera said it was important for Zimbabwe to clear all its arrears, especially with multinational lenders to open fresh lines of credit, with lessons showing that commercial lending will not work for Zimbabwe or any low income country.
This comes as government is working on clearing debt arrears to all preferred creditors such as the World Bank and the African Development Bank, among others.
While Kateera could not give the exact timeline on the completion of the plan, she confirmed that significant work is being made on the plan to clear arrears with our creditors, with priority being given to the multilaterals.
"We have a Debt Management Unit that is handling all debt issues. And as you know, I am a non-accounting secretary who will speak to the macro-economic policy issues only. However, all I can say for now is that we are making a lot of progress towards clearing our arrears, and this is our wish as government, to open new doors and thus open the economy to more business opportunities. In terms of borrowing, we are trying to look at concessional funding that offers low interest rates and long-term repayment periods. If we are to do industrial development projects, like the Beitbridge One-Stop-Border Post or the Beightbridge-Harare-Chirundu Road, why would we take a commercial loan which will eventually weigh us down?"
Kateera said this can be taken into consideration by all low income countries as commercial borrowing tends to drive economies into a debt trap. She emphasised the need for coordination in the utilisation of borrowed money and implementation of projects and programmes, as well promotion of information dissemination through hosting of knowledge events.
Meanwhile, Kateera becomes the first woman to get the executive directorship position at AfDB, Africa Group II Constituency that covers Angola, Namibia, Mozambique and Zimbabwe for three years, beginning on August 1, 2019.
"When I go to the AfDB, my job will require that I attend to economic and financial policies, bank-funded projects and programmes that will be implemented by those countries and advise accordingly. I will also be working closely with the governments, country managers from these countries, as well as the regional director who is based in Pretoria, South Africa. It is important that Zimbabwe be in good books with all its creditors, especially multilateral institutions. This is something we have to do together as a country. It is not a single person's responsibility or governments' only, so that we can successfully open doors and thereby put the economy back onto a sustainable growth path." she said.