Zim looks to qualify for HIPC status
http://www.theindependent.co.zw/
Thursday, 12 January 2012 17:38
Paidamoyo Muzulu
ZIMBABWE has started working with international financial institutions and
development partners, among them the British government, in looking at ways
to qualify for debt relief under the Highly Indebted Poor Countries (HIPC)
initiative.
Zimbabwe owes US$7,4 billion to both foreign and local creditors, and more
than half of that debt was accumulated between 2003 and 2009, treasury
records show.
Most of the money was spent on quasi-fiscal operations that were meant to
protect President Robert Mugabe’s government, which was under siege from the
opposition MDC since 2000.
Zimbabwe defaulted on debt repayment from 2002 resulting in its suspension
from the International Monetary Fund (IMF) and the World Bank lending
facilities.
The Bretton-Woods institutions’ actions have further worsened Zimbabwe’s
liquidity crunch with the country failing to access cheap offshore funding
because of its low credit rating and political risk.
The British embassy first secretary for politics and communications in
Harare Keith Scott confirmed the talks, but said they were conditional on
Zimbabwe implementing the 2008 GPA in full and the holding of credible
elections.
Scott said: “The government of Zimbabwe is working with the international
financial institutions and with donors, including the United Kingdom, to
clarify the exact amount of Zimbabwe’s indebtedness and establish its
eligibility for debt relief under the Highly Indebted Poor Countries (HIPC)
Initiative. The United Kingdom supports this work. But debt relief can
only be given once Zimbabwe has completed its political transition through
credible elections.”
Zimbabwe owes Britain just over £155 million. This comprises £114,9 million
owed to the UK Export Credit Guarantees Department, £9,8 million to the
Department for International Development (DFID) and £30,6 million to CDC (a
development finance institution run by DFID).
Scott said Britain had not released any fresh money to Zimbabwe as loans,
but is concentrating on providing grants through United Nations agencies for
humanitarian assistance.
“All British bilateral aid is given to Zimbabwe as grants, not loans and
does not therefore add to Zimbabwe’s debt,” said Scott.
“British aid funds do not pass through the government of Zimbabwe, but are
channelled through UN agencies, international NGOs, or private sector
organisations,”he said.
Britain’s assistance is expected to top £80 million in the 2011-12 financial
year, the highest level ever extended to Zimbabwe in a single budget. The
support is intended for livelihoods, infrastructure and essential services.
The debt cancellation would go a long way in easing Zimbabwe’s sovereign
debt burden that currently stands at US$7,4 billion. The debt has been
steadily piling up with interest as the country continues to default on
payment.
The British loans contracted over the last three decades, according to the
2012 Blue Book, were spent on equipping the army, reviving Ziscosteel and
developing irrigation infrastructure across the country.
The single largest loan was a US$30,4 million loan contracted in 1997 from
UK/Berliner Bank AG for constructing the new Harare International Airport
terminal. The debt was due in 2009 and has since ballooned to US$65,6
million including interest and other charges.
The Ziscosteel debt constitutes nearly a third of the debt inclusive of
interest (US$53,71 million), according to figures contained in the 2012 Blue
Book for government expenditure estimates during the current year.
The coalition government is still haggling over what course to follow on
managing its debt.
The Finance ministry and the Reserve Bank are solidly behind the HIPC route,
while some argue that this would further open the country to western
neo-liberalism.