Govt moves to address debt situation

via Govt moves to address debt situation | The Herald August 20, 2015

GOVERNMENT and international financial institutions have constituted a committee to focus on debt resolution as part of re-engagement efforts aimed at finding a solution to the country’s debt situation. The quadripartite committee comprises Government, the World Bank, the African Development Bank, IMF and the Reserve Bank of Zimbabwe.

The RBZ Governor Dr John Mangudya chairs the committee which will meet in Lima in October.

“We have agreed that we will have a roundtable in October in Lima during the meetings of the WB and the IMF where we will then chart the way forward with regards to resolving the obligations on the WB part,” the permanent secretary in the Ministry of Finance and Economic Development Mr Willard Manungo said.

The country’s global debt has become an albatross and has had a telling effect on Government’s efforts to turnaround the economy.

As at the end of June, Zimbabwe’s public and publicly guaranteed debt stood at $8,4 billion.

This comprises external debt of $6,7 billion, representing about 47 percent of GDP, and domestic debt of $1,7 billion.

Zimbabwe owes bilateral creditors $3,5 billion including arrears, Paris Club $2,8 billion, non-Paris Club $709 million, multilateral creditors $2,57 billion while the RBZ owes external creditors $587 million.

The debt situation has undermined the country’s capacity to unlock new capital as a track record of honouring obligations becomes central.

But Government is making all efforts to normalise relations with local and international financiers in a bid to attract new investments particularly in infrastructure development.

“As Government, we are doing our part in terms of ensuring that we are on the track to dealing with the arrears that we have which are central to any re-engagement that we need to do.

“It is our wish that during the last half of 2015 we deal with all the obstacles that remain for us to be on a sustainable part towards debt relief,” said Mr Manungo.

Bankers Association of Zimbabwe president Mr Sam Malaba told a business conference recently that the debt is hindering the country from accessing new investments.

“If you want to raise money internationally you must have no arrears. In our case we can’t go to the international markets to raise funding.

“That’s the most important issue that we must deal with as a country to try and clear the IMF, WB and AfDB arrears.

“The debt arrears mean that as a country we are perceived as a high risk country,” said Mr Malaba.

He said even when there is an opportunity to borrow there is a high risk premium of at list five percent, making capital more expensive.

Expensive capital makes local companies uncompetitive.