Debt cancellation plea

Zimbabwe pleads for debt cancellation

Daily News  - by John Kachembere

5 July 2014

Finance minister Patrick Chinamasa has pleaded with Zimbabwe’s external creditors to inject more capital into the country despite a US$9,9 billion debt overhang.

Chinamasa told journalists on Thursday the cash-strapped southern African country had no capacity to repay its debt due to a worsening economic environment.

“We are engaging our creditors with a view to see what measures we can take to alleviate our debt situation.

“In particular, so that we clear the way to attracting foreign direct investment and also persuading them, the very creditors, to grant us money.

“But it’s a very long road, maybe two to three years down the line,” he said.

Chinamasa, however, conceded that it would be hard for Zimbabwe to get fresh capital because it has been failing to service its debt and was negotiating with creditors for an amicable solution.

“What I am telling them (creditors) is that I have no capacity to pay arrears.

“I have no capacity to pay the principal debt. What I want is new money to build capacity especially to the productive sector to broaden the tax base so that the country has the capacity through more inflows into the fiscus to honour its international and domestic obligations,” said the Treasury boss.

Market experts say Zimbabwe’s debt overhang has been hindering the smooth flow of foreign direct investment and economic development.

To its credit, the country has over the past few years crafted various mechanisms — including the Zimbabwe accelerated arrears clearance debt development strategy — to deal with the debt situation.

This comes as the African Development Bank (AfDB) will in September convene a debt resolution forum for Zimbabwe, as the southern African country, steeped in debt, is increasingly failing to repay creditors.

Zimbabwe is in arrears of half a billion to the AfDB, with the total debt being US$726 million.

The country also owes US$833 million to the World Bank in arrears, while the IMF is owed US$124 million.

Despite efforts by officials of the southern African nation to raise funds, international lenders are not willing to extend any more money to the country, precipitating a liquidity crisis and a flat lining of economic growth prospects.

AfDB estimates that Zimbabwe requires US$16 billion to revamp its road, rail, telecommunication and power infrastructure, which have deteriorated over the years.

AfDB recently noted that the planned forum, the second in two years and led by its president, Donald Kaberuka, would consider three ways it could help Zimbabwe clear its huge debts.

The bank said it would settle on a rescue package.

“We have three or so options that we think Zimbabwe can pursue and get out of this debt quagmire,” Mthuli Ncube, the bank’s chief economist told a news conference on the sidelines of the AfDB annual meeting.

The deal will be disclosed at the forum in three months’ time.

In 2012, AfDB hosted a debt resolution forum in Tunis, Tunisia for Zimbabwe, where the country’s creditors met to map a strategy.

Meanwhile, outgoing World Bank country manager, Mungai Lenneiye said Zimbabwe does not qualify for debt relief under the Heavily Indebted Poor Countries (HIPC) strategy, because it has capacity for a sustainable economic recovery.

Lenneiye said while Zimbabwe had an unsustainable debt, the fact that it could produce and export meant there is still room for recovery.

Zimbabwe expects to collect US$4,12 billion in 2014 in exports, slightly up from US$3,8 billion last year.

The International Monetary Fund in January approved a six-month extension of a monitoring programme for Zimbabwe aimed at helping it to clear US$10 billion in external debts and give it access to much-needed new international credit.