The World Bank and the African Development Bank (AfDB) have approved two parallel initiatives to soak away Zimbabwe’s delinquent debts to the multilateral lenders, subject to one condition: that government hurries a plan to settle arrears to shrug off its “bad debtor” tag.
The AfDB on Monday revealed it has “ring-fenced” about $500 million from its next African Development Fund (ADF) to “help clear Zimbabwe’s arrears with the bank”, currently estimated at nearly $0,5 billion.
The World Bank has also offered a hybrid debt management and arrears clearance programme called Staff Monitoring Programme, which would be set up in Zimbabwe’s Treasury with an aim to restructure the country’s debt to the Breton Woods institution and unlock a grant prior to arrears clearance.
The country is technically barred from receiving new credit until it deals with its growing stock of external debt, which is seen racing to $7,6 billion by year-end through interest, private sector loans included.
AfDB head of mission Damoni Kitabire on Monday said under its initiative Zimbabwe would be obliged to set up an Arrears Clearance Action Plan by mid-2012 in order to qualify for the ADF aid.
“We are hoping that the government will accelerate its plans to address arrears to the bank by having an Arrears Clearance Action Plan for the bank (and other multilateral creditors) by mid-2012, otherwise the funds will revert to the pool at the mid-term review of the ADF-12 cycle,” Kitabire said.
“We are hoping this issue will be given prominence in the 2011 budget.”
World Bank country manager Nginya Linneiye also said the lender expects government to prioritise the establishment of the Staff Monitoring Programme to qualify of a pre-arrears clearance grant.
Zimbabwe’s Treasurer Tendai Biti, who initially favoured the Highly Indebted Poor Country (HIPC) route as opposed to debt settlement, appears to have bitten the bullet.
“The way forward is to finalise and implement external debt and arrears clearance strategy,” Biti said on Monday.
“As we draw up the 2011 National Budget, input from the cooperating partners is invaluable as it will enrich the process.”