ZIMBABWE has agreed to make monthly and quarterly payments to three international financial institutions as it begins a journey to resolve its US$10,7 billion external debt.
REPORT BY OUR STAFF
The commitment is contained in a letter to the International Monetary Fund (IMF) managing director, Christine Lagarde arguing Zimbabwe’s case for an IMF supervised economic programme.
Last month, the IMF approved a Staff Monitored Programme (SMP) on Zimbabwe.
An SMP is an informal agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic programme.
Among Zimbabwe’s creditors are the World Bank (US$976,45 million), IMF (US$127,4 million), European Investment Bank (US$244 million) and US$587 million owed to the African Development Bank (AfDB).
Zimbabwe is using the Zimbabwe Accelerated Arrears Clearance and Debt Development Strategy (Zaads) to deal with the debt issue.
In a joint letter signed by Finance minister, Tendai Biti and central bank chief, Gideon Gono, Harare told Washington that it was committed to making regular payments to the Fund to clear its debt under the Poverty Reduction and Growth Trust Fund.
“Given the tight fiscal space, we are committed to making monthly payments during 2013 of US$150 000. We also intend to make payments to the World Bank in the amounts described in their Interim Strategy Note, and comparable payments to AfDB, during the rest of 2013,” Zimbabwe said.
Zimbabwe will make quarterly payments of US$900 000 to the World Bank with the amount expected to increase following the improvement in the capacity to pay.
During the SMP that is set to run up to December, Harare promised Washington that it would only resort to grants and concessional loans to finance national development, adding that it could only resort to non-concessional loans in exceptional circumstances. These non-concessional loans would be contracted only “to implement critical projects in the areas of water and sanitation, electricity and roads.”
However, the amount of non- concessional borrowing would not exceed 3% of Gross Domestic Product (US$330 million) during the SMP period.
Zimbabwe has also committed itself to assessments from AfDB, the Development Bank of South Africa or the World Bank to ensure that the identified projects would have high economic and social impact before signing any agreement.
Biti told Standardbusiness recently that the huge external debt acted as sanctions on the country as it could not access lines of credit required to reboot the economy. He also said Zimbabwe could not access cheap funds awash on the world’s capital markets due to the unresolved external debt.
IMF is considered a financial “Commissioner of Oaths” and its actions on a country are closely followed by would-be lenders.