HARARE: Finance Minister Patrick Chinamasa says the World Bank and African Development Bank (AfDB) have approved the country’s debt refinancing plan, clearing a major hurdle as it bids to pay off $1.7 billion arrears owed to the two lenders.
The country, which has been frozen out of international debt markets since the turn of the century after defaulting on loans with multinational lenders, hopes its debt clearance programme will re-open access to fresh funding.
Zimbabwe is pursuing a debt clearance plan tabled before the World Bank, AfDB and the International Monetary Fund (IMF) in October 2015, which would see the southern African country clear $1.7 billion in arrears in a bid to unlock fresh funding for its capital-starved economy.
The country cleared its arrears with the IMF following a $110 million payment last October.
“The Government of Zimbabwe is pleased to announce that it has met all the conditions precedent to the repayment of debt arrears to the World Bank and the African Development Bank (AfDB),” Chinamasa said in a statement late Thursday.
He said the two institutions had “scrutinised and adjudged” the terms of facilities that the Reserve Bank of Zimbabwe has put in place to repay the debt arrears and found them to be reflective of current market conditions, with financing terms similar to market transactions recently concluded by several sub-Saharan African countries during 2016 and 2017.
“It is on this basis that Zimbabwe can now proceed to repay its debt arrears,” Chinamasa added.
Although his statement did not disclose the conditions laid out by Zimbabwe, both he and central bank governor John Mangudya have said the country would use bridge finance from the African Export and Import Bank (Afreximbank) to pay off $819 million to AfDB ($585 million), the AfDB’s African Development Fund ($16 million) and the World Bank’s International Development Association (IDA), $218 million.
Last July, following a visit to the United Kingdom, Chinamasa and Mangudya announced that Zimbabwe would rope in New York listed financial advisory and asset management giant Lazard in a separate effort to raise funds to clear $896 million arrears with the World Bank.
Initially, Zimbabwe had hoped to secure a bilateral loan from “a friendly country”, believed to be Algeria, but abandoned this plan.Advertisement
Instead, Lazard has reportedly put together a consortium of international banks, including Britain’s Standard Chartered Plc, to raise the funds.
Standard Chartered confirmed the plan last December, following criticism by rights activists that the bank was working on a bail-out plan for President Robert Mugabe’s government, which is accused of widespread abuses, a charge the veteran ruler denies. The bank said it would only proceed with the Zimbabwe plan if the UK government approved it.
Although Zimbabwe’s government has not provided details of the loan package Lazard is putting together, a report by the private weekly Zimbabwe Independent last December suggested Harare would use gold to secure the loans.
Zimbabwe’s economy declined by as much as 50 percent between 2000 and 2008 but grew by double digits between 2010 and 2012 after informal dollarisation under a power-sharing government formed by Mugabe and the opposition ended a hyperinflation crisis.
The economy has flatlined since Mugabe’s 2013 re-election and is in the grips of a liquidity crisis caused, in part, by low levels of production in key sectors such as agriculture, mining and manufacturing.