Zimbabwe Says It’s on Course to Clear $1.8 Billion Loan Arrears

HARARE, Capital Markets in Africa: Zimbabwe will clear the $1.8 billion of arrears it owes the World Bank, International Monetary Fund and African Development Bank once it has a new financing plan with the three multilateral lenders, Finance Minister Patrick Chinamasa said.

The southern African nation is continuing negotiations with the three on financing industries such as agriculture, Chinamasa said in an interview in Rwanda’s capital, Kigali. A survey of how much money is required is being undertaken and once agreed, it will enable the economy to access fresh funding from the three lenders.

“A strategy for clearing of arrears is running parallel with negotiations for a country finance program,” Chinamasa said. “Neither of them is complete. A country finance program should be in place before and we should be clear how much money we need. Only then can we clear the arrears.”

Chinamasa said earlier this year the country would repay at least $1.8 billion by the end of June to be able it to resume borrowing. Last week, central bank Governor John Mangudya said Zimbabwe has not paid anything. The nation owes $110 million to the IMF, $1.1 billion to the World Bank and $601 million to the AfDB, Mangudya said.

Chinamasa has been leading efforts to revive the southern African nation’s struggling economy and tap fresh financing from the IMF. The economy has halved in size over the past 16 years and about 90 percent of the population is out of formal employment.

“What Zimbabwe needs right now is new money into the productive sectors of the economy,” he said. “Just clearing arrears alone is not enough, it will mean our risk profile improves, but that alone is not enough.”

Working Frantically
The government has banned some South African imports ranging from baked beans to wheelbarrows and wants to renegotiate trade deals with the nation that is also its largest trading partner, Chinamasa said. There is “inequity in our trading relations” and discussions on restructuring trade relations would be undertaken by the respective trade ministers.

“We should not allow a situation where we are being used as dumping ground for cheap South African goods,” he said.

The government may have to revise its 2016 growth forecast downwards as productivity declines, he said. Industrial production was very low and the shift toward the informal sector affects revenue collection and the state’s ability to pay workers. Zimbabwe has already cut its forecast to between 1.1 percent and 1.5 percent this year, from 2.7 percent earlier, on account of a drought in the region.

Chinamasa couldn’t say whether the government has money to pay salaries due at the end of July.

“We have to work frantically to raise the money for salaries for July and for subsequent months,” he said.

Source: Bloomberg Business News