Published: 15 February 2018

President Emmerson Mnangagwa's government says it is committed to repay its debts with the international community.

Central bank governor John Mangudya said in line with the new economic order, government is intensifying the re-engagement process with the international community to improve international relations and to resolve the external payment arrears to the remaining International Financial Institutions (IFIs) as well as bilateral creditors.

"In this regard, government will follow the previously agreed process for clearing external payment arrears to IFIs, which was endorsed by the IFIs and Bilateral Creditors at a meeting held on the side lines of the Annual Meetings of the International Monetary Fund (IMF) and World Bank in Lima, Peru, in October 2015," he said.

Zimbabwe made debt and arrears clearance plan almost three years now, but the plan soon ran into problems in 2017 due to usurious interest rates, costly mortgaging of mineral resources, the absence of a sustainable economic recovery plan and lack of political will to implement a raft of reforms.

With the coming in of a new government, Mangudya said the successful resolution of arrears to IFIs will pave way for government to negotiate debt restructuring mechanisms with the Paris Club creditors.

"The ensuing improvement in economic activity following successful re-engagement will significantly reduce the country's risk premium and unlock offshore credit lines at affordable interest rates. Access to foreign finance, which has been significantly limited over the past seventeen years now, is critical to increase foreign currency buffer for the country," he said.

"In addition, government will also be in a position to actively engage the donor community to complement government support to targeted social and developmental programmes. The envisaged high economic growth rates to be experienced will go a long way for the country to sustain appropriate debt levels, increase fiscal space, jobs, production and exports," the RBZ chief said.

However, former Finance minister Tendai Biti, said the international community should not support the arrears programme.

"Lima is anti-Zimbabwe people. Debt is a disease. You don't cure an alcoholic by locking him in a bottle store. Lima is a poisoned chalice because we are poor already," he said.

Biti, a key member of the opposition alliance, said funds sourced to pay the arrears had usurious rates which would perpetuate the country's debt crisis.

Before successfully clearing its arrears to the IMF recently, Zimbabwe owed three international financial institutions which enjoy preferred creditor status, $1,8 billion.

Zimbabwe presented an arrears clearance plan to its creditors in Lima in 2015, which was anchored on several financial sector and structural reforms.

The country requires a raft of reforms, which include reducing the fiscal deficit to sustainable levels through the alignment and re-organisation of the public service, to secure funding.

- Financial Gazette

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