Zim nears $10bn debt write-off deal

World lenders are close to a deal with Zimbabwe’s coalition government for $10 billion in debt relief, Finance minister Tendai Biti has said, as multilateral financial institutions seek to help Harare shore up its ailing economy.
International Monetary Fund (IMF), World Bank and African Development Bank (AfDB) officials and negotiators for Zimbabwe’s fragile coalition government were working to finalise an agreement, Biti said in his budget statement presented last Thursday.

Progress on the aid package, which had been caught up in controversy in the coalition’s political turmoil, appears to reflect a cautious easing of Western sanctions and a desire to show economic goodwill to help revive the longstanding Western-Zimbabwe partnership, strained by a decade of socio-economic and political turmoil.

Biti said a deal was being brokered under the Zimbabwe Accelerated Arrears Clearance Debt Development Strategy (Zaads) — mooted in March 2012 — and will include a waiver in unpaid debt.

Zimbabwe has of late sent a clear signal to the multilateral financial institutions of its intention to comply with a tough economic structural adjustment regime if the world lenders write off the $10,7 billion debt.

The debt write-off could help Zimbabwe gain access to fresh capital to shore up its stuttering economy and bankroll urgent infrastructure needs.

“Zimbabwe’s external debt is now estimated at more than $10 billion and for more than a decade, the country has been in default, with arrears now estimated at $6,1 billion,” Biti told Parliament.

“This has constrained development cooperation with external partners, particularly in the areas of long-term infrastructure investment, official development assistance and in some selected instances, private investment.

“It is in this regard that government has been engaging multilateral financial institutions, the IMF, World Bank and AfDB, for debt resolution, including some debt relief under a recovery programme that would support sustainable stabilisation and boost the credibility of the country’s reforms, that way catalysing cooperating partners’ and creditors’ support.”

The inclusive government, formed after disputed 2008 elections, has helped to transform the pariah image of Zimbabwe and persuade the West to begin rolling back sanctions after three years of dramatic economic reforms.

The IMF, long wary of Harare’s protracted arrears, shifted policy last month to resume technical assistance to support Zimbabwe’s implementation of a comprehensive adjustment and structural reform programme that can be monitored by the Bretton Woods institution’s staff.

Analysts say one way the multilateral financial institutions could influence the direction of policy in Zimbabwe, a nation at the heart of the Bretton Woods groups’ regional policy, would be through economic support as Harare tries to starve off a balance of payments and budget crisis.

Obstacles remained to completing the debt relief deal — which is reported to involve a mix of debt payment waivers and complicated economic structural reforms, including retrenchments in the civil service — and it was not immediately clear when an agreement might be announced.

But even as the negotiations proceeded with the world lenders, Biti also signalled he was pursuing lines of credit including a R575 million facility with South Africa; $50 million facility from Angola; 500 million pula facility with Botswana and $100 million line of credit from India.

Zimbabwe was also seeking food relief from Brazil under the Food for Africa initiative. 

By Gift Phiri

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