Last week, Standardbusiness reporter Kudzai Chimhangwa (KC) had a conversation with AfDB resident representative Mahamudu Bawumia (MB), who provided some useful insights into the multilateral financial institution’s activities in Zimbabwe.
KC: The AfDB has been off the radar for some time, has the GNU (Government of National Unity) provided a glimmer of light?
MB: The AfDB re-engaged with Zimbabwe in 2009 after suspension of its operations in 2002, due to accumulation of arrears. Even though the bank did not have offices in Zimbabwe during this period, we continued to support the country whenever feasible.
For example the bank has been active since 2005 in supporting capacity building in Zimstats (Zimbabwe National Statistics Agency).
KC: What is your assessment of Zimbabwe’s potential to repay its debts to the bank without compromising other key economic priorities in view of its constrained fiscal space?
MB: Zimbabwe is currently labouring under a large debt burden of some US$7 billion. The accumulation of arrears and inability to service this debt has denied Zimbabwe access to funding and lines of credit from the International Financial Institutions (IFIs), as well as bilateral and commercial creditors.
The clearance of arrears is key for the country to access potentially large amounts of financing, including from the AfDB for its development efforts.
KC: But then how best can this challenge be resolved considering that this issue has been the bane of resuscitation?
MB: The implementation of a comprehensive debt resolution strategy and negotiations with IFIs for an arrears clearance plan is vital in this respect.
Recognising the difficulty Zimbabwe would have in paying its debts, the Bank has set aside US$500 million to support Zimbabwe, Sudan and Somalia on a first-come first-served basis to clear their arrears to the bank.
KC: What is the breadth and scope of the AfDB’s activities in Zimbabwe considering the recent setting up of offices in the country?
MB: Currently, the bank’s operations in Zimbabwe are focused in areas such as infrastructure, the private sector, governance, public financial management, statistical capacity building, and regional integration. We are also offering support for capacity building in the area of debt management.
In 2010, the AfDB was designated and requested by the government of Zimbabwe and the donor community to manage the Zimbabwe Multi-Donor Trust Fund (Zim-MDTF), created by a group of donors to support the recovery process in priority areas and for donor co-ordination. Under the Zim-MDTF for example, two projects are currently being undertaken in the water and power sectors.
KC: How will the Multi-Donor Trust Fund’s funds to the tune of US$68,8 million be specifically disbursed, according to which sector allocation?
MB: As I said, two priority projects in the power and water sectors have been identified for possible financing from the Zim-MDTF so far. Under the water project, we aim to support urgent rehabilitation works in terms of restoration and stabilisation of water supply and sanitation services to municipalities in Harare, Chitungwiza, Mutare, Chegutu, Masvingo and Kwekwe to target a total population of approximately 4,15 million people.
The energy project aims to improve the reliability of power supply in an environmentally sound manner through the rehabilitation of the Ash Plant at Hwange Power Station and the sub-transmission and distribution facilities in the country.
Future projects are envisaged depending on the successful completion of the identified priority projects and the willingness of donors to support the fund.
KC: Does the AfDB intend to engage the country’s monetary authorities in any way on a regular basis?
MB: The AfDB will continue to provide technical assistance to Zimbabwe in the area of debt management and will assist the government to implement any practicable options.
The bank’s mandate is to assist member countries to grow their economies and reduce poverty. We will continue to engage the monetary authorities as we do in all our member countries to deal with issues that would foster economic growth and social development in Zimbabwe.
KC: Lastly, what specific areas has the AfDB identified with regard to where Zimbabwe has significant potential to develop its economy resulting in better livelihoods for the ordinary people?
MB: Zimbabwe has significant potential in many areas, including its human resources, with one of the most literate populations in Africa, agriculture, a good industrial base, its tourist potential, mineral and natural resources, etc.
The economy is however producing below its potential and it is therefore important for Zimbabwe, with support from government, the private sector, donors and international community, to come together to deal with some of the constraints that are preventing this great country from realising its potential.
We at the AfDB, working with government, have identified the availability of reliable infrastructure as a major constraint. This has resulted in the publication of the Flagship Infrastructure and Growth in Zimbabwe Report, which was recently launched, with an action plan on the way forward.