Updated: Zim seeks $1,1 billion to clear WB arrears

via Updated: Zim seeks $1,1 billion to clear WB arrears – NewsDay Zimbabwe February 10, 201

Government will secure a medium to long-term loan to clear its $1,1 billion arrears to the World Bank Group in the second phase of an arrears clearance programme with preferred creditors as it seeks to unlock fresh lines of credit.

BY BUSINESS REPORTER

Zimbabwe has an arrears clearance plan to repay by June 30 the $1,8 billion owed to three preferred creditors — the World Bank, International Monetary Fund and the African Development Bank (AfDB). The plan was approved by creditors on the sidelines of the IMF/World Bank annual meeting in Lima, Peru.

Zimbabwe owes the International Bank of Reconstruction and Development (IBRD) $896 million. A unit of the World Bank Group, IBRD provides loans and assistance to middle income countries. It also owes the International Development Association (IDA) $218 million. IDA is a World Bank’s unit which helps the world’s poorest countries.

According to the Lima strategy document titled Strategy for Clearing External Debt Arrears and the Supportive Economic Reform Agenda obtained by NewsDay yesterday, the loan would have a tenure of 10 to 15 years at an interest rate of 5-7% per annum. It would be repaid as a bullet payment, that is, the entire loan plus interest are payable at the end of the loan tenure.

The first step would be for government to use the bridge loan facility arranged by its debt advisors, the African Export-Import Bank, to clear its outstanding arrears to AfDB ($585 million) and African Development Fund ($16 million). The bridge loan would be repaid using inflows from the Fragile State Facility of AfDB, the document said.

The second phase entailed using government’s Special Drawing Rights holdings to clear the $110 million owed to IMF.

The debt clearance strategy would be supported by bold policy reform measures aimed at debt sustainability and improving the socio-economic environment.
The measures include strengthening financial sector confidence, accelerating the re-engagement process with the international community and revitalising agriculture and the agro-processing value chain.

It also entails advancing beneficiation and/or value addition to the agriculture and mining resource endowment, focusing on infrastructure development, unlocking the potential of small to medium enterprises and improving the investment climate.

The clearance plan is also anchored on accelerated public enterprises reform and improving public finance management, modernisation of the labour laws and aligning of laws to the Constitution and adhering to the rule of law and the pursuit of an anti-corruption thrust.

Government hopes that the successful resolution of the external payment arrears would expect to disseminate positive signals to investors and lenders.

“In this regard, the perceived country risk premium that has made credit lines to Zimbabwe unaffordable will be reduced significantly. As a result, the country would be able to access credit lines at competitive rates, a development that would positively impact on the cost of doing business in Zimbabwe,” the document added.

In his monetary policy statement released last week, central bank chief John Mangudya said after the clearance of the arrears to international financial institutions (IFIs), the country would then turn to bilateral creditors to negotiate and settle the country’s obligation with the Paris Club.

“Settlement of these arrears would be done around June 2016 at a time the IFIs are expected to reach their respective decision points or board approvals.
Repaying before the review of the Staff Monitored Programme (SMP) by the IMF and other proceeding processes is inconsequential,” Mangudya said.

For the Full Lima Document please click here: Lima Strategy document

COMMENTS

WORDPRESS: 2
  • comment-avatar

    So, they are going to borrow money to pay the arrears !!!!!!!!!!

  • comment-avatar
    IAN SMITH 6 years ago

    What is a mere US $1000000000 when we spend US $1000000 in one day on a birthday party, flying to the Far East, Addis Abba etc. this is small smacks, chicken feed not worth mentioning are you joking ha! ha! ha!

    Zimbos Know how to milk a dead cow get diesel from a rock etc.