Oxford University’s NKC African Economics has said Zimbabwe needs a credible plan to clear arrears with international financiers, while depending entirely on domestic resources to expunge its huge debts.
BY VICTORIA MTOMBA
The comments come in the wake of the decision by the International Monetary Fund (IMF) to remove remedial measures against Zimbabwe, enabling the multilateral institution to resume non-funding support to Harare
NKC said a credible plan to clear arrears with other international financial institutions and bilateral creditors accompanied by fiscal reforms would enable Zimbabwe to access fresh funding from the IMF.
“Re-engaging with external financiers could open the taps to fresh funding,” NKC said in its latest update.
It said Zimbabwe’s enormous external debt overhang was impeding its access to the external financing necessary to stabilise the macroeconomic environment.
The country owes external and internal creditors $10 billion and was $1,8 billion in arrears to the three preferred creditors — IMF, the World Bank and the African Development Bank (AfDB).
Zimbabwe owes AfDB $601m, World Bank’s International Development Assistance ($218m) and the International Bank for Reconstruction and Development ($896m) as well as the European Investment Bank ($214m)
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“The country is engaging the African Export-Import Bank (Afreximbank) for bridge financing to clear the AfDB loan, which will not reduce the country’s external debt, but rather increase it. Zimbabwe should use domestic resources in addressing its debt overhang, accompanied by fiscal consolidation,” NKC added.
The country is currently suffering from a fiscal crisis characterised by successive budget overruns due to recurrent expenditure, with civil service wages gobbling 97% of the $4 billion cash budget in the first half of 201 6, and indications of a $1 billion budget deficit by year end.
Former Economic Planning minister Tapiwa Mashakada said: “IMF funding decision is not isolated from other multilateral organisations. The IMF looks at the holistic debt position of Zimbabwe that influences its decision. But most importantly economic reforms are a necessary condition, Zimbabwe’s sovereign risk remains highly rated.”
This week, the IMF lifted remedial measures that include the declaration of non-co-operation with the IMF, suspension of technical assistance which was partially lifted in 2009 and the inclusion of Zimbabwe on the list of ineligible Poverty Reduction Growth Trust countries.
The country paid $107,9m worth of its Special Drawing Rights to the IMF last month and the country is now current on its obligations.
