Zim economically distressed — AfDB

via Zim economically distressed — AfDB – DailyNews Live 30 October 2015

HARARE – Zimbabwe is regarded as an “economically-distressed state” by the African Development Bank (AfDB) due to the country’s present economic situation, the Reserve Bank of Zimbabwe (RBZ) governor has said.

Central bank chief, John Mangudya told delegates attending the Confederation of Zimbabwe Industries (CZI) meeting in the capital on Wednesday that the country’s “fragile position” helped it to receive a special grant from the regional lender to clear its external debt.

“The AfDB has set aside a window for fragile states and Zimbabwe falls in this category with three others which are Sudan, Ethiopia and Eritrea. It may sound derogative but it is the truth of the matter,” Mangudya said.

He was responding to questions on how Zimbabwe was going to raise the $600 million owed to the AfDB and meet an April 2016 deadline set by the country’s preferred creditors for the clearance of close to $1,8 billion arrears owed to preferred creditors, the AfDB, International Monetary Fund (IMF) as well as the World Bank (WB).

Finance minister Patrick Chinamasa recently announced that the AfDB management was currently in the process of developing a paper to its executive board for the grant to be availed to Zimbabwe.

Analysts say the transaction is tantamount to debt forgiveness for a country that is slowly receding into full blown deflation with economic growth expected to be 1,5 percent from the initial target of 3,2 percent.

Chinamasa said the funds aimed at the clearing of Zimbabwe’s arrears to the AfDB were to be availed under the Pillar II of AfDB’s Transition Support Facility.

“The final decision, and the size of the envelope, rests with the executive board of the AfDB. The window remains open until December 2016,” said Chinamasa then.

According to the AfDB, Pillar II of the Transition Support Facility is awarded to “fragile economies.”

“To maximise the bank group’s contribution to building resilient, stable, and capable states. The strategy is grounded in the principles of the New Deal for Engagement in Fragile States…

“Its effective implementation requires close coordination with international fora, such as the International Dialogue on Peace-building and State-building, and strategic alliances with other development partners,” the bank says.

The country is saddled with an external debt of nearly $10 billion and owes the IMF $124 million in arrears accrued since 2000 and  another $1 billion owed to the WB.

Economic experts say financial institutions including the WB and AfDB are barred by law from extending loans to Zimbabwe because of outstanding debts.

But, the country recently reached a repayment consensus with its preferred creditors in Peru, at the IMF/WB meetings.