ZIMBABWE must pay its arrears to the three preferred international creditors now or risk accumulating interests on the defaults, the central bank governor John Mangudya has warned.
BY VICTORIA MTOMBA
Mangudya told journalists and bankers at his monetary policy presentation last week that Zimbabwe’s re-engagement with the financial institutions was being pulled back by certain sections of society and not the International Monetary Fund or World Bank.
Mangudya’s warning comes in the wake of efforts by lobbyists who are calling on the international financial institutions not to re-engage Zimbabwe until the country addressed human rights issues, among other concerns.
“Some people are saying don’t pay. Don’t be paid [arrears] so that we can suffer from non-performing loans? We are now being charged default interest rates on the loans. The amount will be high if we don’t pay [now]. We have to be careful about the clearance of arrears. It is not for Mangudya,” he said.
Zimbabwe owes over $10 billion to bilateral and multilateral creditors. It has promised to pay a combined $1,8 billion debt repayment to the three preferred creditors — IMF, the World Bank and African Development Bank.
“As I was saying, we are getting this [sabotage]. I, being the chairman of the external arrears clearance and re-engagement process committee, am a bit concerned. There are people in this country who do not want us to clear these arrears, I don’t know why.”
Mangudya said if the country did not clear the arrears, the financial sector would not be able to access funding due to the perceived country risk.
He reaffirmed that Zimbabwe was one of the four most fragile states on the continent alongside Eritrea, Sudan and Somalia.
Zimbabwe views the clearing of arrears to international financial institutions as a key step to unlocking cheap lines of credit. The liquidity shortages in the market have exposed the vulnerability of the country shown by low exports and rising imports.
Mangudya said Zimbabwe would pay the $1,8 billion after the three institutions held their board meetings, adding the process would be completed by year-end.
IMF and World Bank Group hold board meetings after the annual meetings of the two institutions to be held from October 7 to 9 in Washington.
At last year’s annual meetings in Peru, Zimbabwe presented a credible plan to creditors that would enable the country to settle its arrears to the international creditors as the first step towards clearing its debt.
Government has said it would use the special drawing rights to pay IMF’s $110 million debt, secure a medium-to-long-term loan to clear its $1,1 billion arrears to the World Bank and use a bridge loan facility to pay AfDB group’s $601 million.