Zimbabwe has to urgently clear its arrears with the Bretton Woods Institutions and the African Development Bank (ADB) in order to access more lines of credit necessary to fund the economy, the World Bank has said.
BY TATIRA ZWINOIRA
Zimbabwe has an external debt of about $7,1 billion and combined with the internal debt, the figure balloons to over $9 billion as at December 2014.
“The resolution of Zimbabwe’s debt overhang and the clearance of arrears need to be treated with the urgency it deserves,” executive director of World Bank’s Africa Group Louis Rene Peter Larose said on Tuesday.
“I commend recent efforts by the government to engage the international community on this critical issue.”
Larose, who is on a visit to the country, said the government had agreed on a second Staff-Monitored Programme (SMP) with the International Monetary Fund (IMF).
He said this was crucial for providing a documented track record of economic policies set to alleviate the country’s debt.
“The current lack of new financial flows to jumpstart economic growth is well-noted. It is, therefore, imperative that efforts towards debt relief and the clearance of arrears, especially to the Bretton Woods Institutions and to the African Development Bank be pursued vigorously,” said Larose.
“We need to clear arrears owed to the WBG (World Bank Group), IMF, and ADB as a matter of urgency. This will enable Zimbabwe to access resources from these international financial institutions (IFIs) needed to support the transformation of the economy.”
According to Larose, the civil service wage bill consumed around 87% of the country’s revenue. He added that there was need to institute parastatal reforms to minimise the debt.
The first SMP centred on the clarification of the fiscal regime, transparency, accountability of the mining sector, improvement in public finance management, including amendments to the Public Finance Management Act and the Public Procurement Act and enhanced oversight of State-owned enterprises. Part of the efforts in clearing the country’s debt involve meetings that the ADB, IMF and World Bank representatives will conduct with key institutions and industries that are crucial to the country’s recovery.
During a media briefing on Tuesday, Finance minister Patrick Chinamasa highlighted government’s efforts to tackle the debt with the Quadripartite Committee set up on May 4 to co-ordinate payment of outstanding arrears.
“The main objective of the visit is for them to have first-hand appreciation of the challenges the country is facing on the infrastructure front, as well as the adverse impact lack of access to capital is having on capacity utilisation of private sector companies,” said Chinamasa. “This visit will enhance the executive directors’ understanding of the political and socio-economic dynamics of our country and thus make a strong case for Zimbabwe at their respective boards.”
Chinamasa said the Quadripartite Committee through the Successor Staff-Monitored Programme (SSMP) was a vehicle in establishing a sound-track record for economic management to unlock financing from IFIs.
The Quadripartite Committee is chaired by Reserve Bank of Zimbabwe governor John Mangudya and comprises officials from government, the IMF, ADB and the World Bank as part of the SSMP to tackle government debt.
“I led the Zimbabwe delegation to the IMF/WB Spring meetings during the period April 17 to 19 2015, Washington DC,” said Chinamasa.
He said the government was working on re-engagement efforts and is firming up on resolving the country’s arrears.
Larose, together with representatives from the IMF and the ADB are expected to visit private and public companies in Bulawayo and Gweru. They will meet the Chief Secretary to the President and Cabinet Misheck Sibanda, Industry and Commerce minister Mike Bimha and Confederation of Zimbabwe Industries officials.