Zimbabwe pays back IMF debts
July 8, 2013 in Business
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.