via Country to settle $10bn debt: AfDB – DailyNews Live 19 June 2015 by Ndakaziva Majaka
VICTORIA FALLS – Zimbabwe will craft a “debt repayment plan” to address the country’s over $10 billion debt overhang by August, the African Development Bank (AfDB) to Zimbabwe representative said.
Mateus Magala, the AfDB local chief envoy, told delegates at the ongoing Buy Zimbabwe 2015: Buy Local Summit, in Victoria Falls, that the ministry of Finance, International Monetary Fund (IMF) and the World Bank (WB) were in deliberations on the way forward over the debt situation.
“The ministry of Finance created a group to see that by August, Zimbabwe can have a road map on how to resolve its debt to various international institutions owed,” he said, adding that the Reserve Bank of Zimbabwe governor, John Mangudya and the Finance ministry permanent secretary, Willard Manungo were also part of the team tasked to help the country out of its debt predicament.
Magala said while the optimum debt ratio benchmark for a country like Zimbabwe was 40 percent, the current national ratio stood between 52 to 54 percent.
“What this effectively means is that the country’s current debt levels are unsustainable,” he said.
Zimbabwe is saddled with an external debt of nearly $10 billion and owes the IMF $124 million in arrears accrued since 2000, while an additional $1 billion owed to the WB.
Early this year, Finance minister, Patrick Chinamasa, announced his strategy to settle the country’s colossal international debt, saying he would negotiate with multilateral lenders first as they are owed the most — then have them mediate for the country to other owed institutions like the Paris Club so that confidence would be restored in the country thereby attracting Foreign Direct Investment (FDI).
Economic experts however, say financial institutions including the WB and AfDB are barred by law from extending loans to Zimbabwe because of the outstanding debts.
Last year, Dominique Fanezzi, IMF head of mission to Zimbabwe, said the country was not going to get debt relief from multilateral institutions, due to its indebtedness.
Meanwhile, Magala said the country needs to invest about $2 billion annually to close its infrastructure gap and boost economic development, with a cumulative need of raising $14 billion for infrastructure development by 2020.
He also said the country needed to invest about $1,2 billion of the $2 billion in power generation projects alone.
“This is the harsh reality of the situation, if the government doesn’t do anything about this the country will always lag behind in development related issues,” he said, adding that the country also had to re-brand in order to become attractive to investors.
He said the risk of investing in Zimbabwe was so great that investors skirted the country as they were “afraid of what might happen to their investment.”