The International Monetary Fund (IMF) says Zimbabwe should prioritise clearing arrears to international financial institutions (IFIs) to be able to access new financing.
On Thursday, Zimbabwe’s plan to clear its arrears to IMF, World Bank and the African Development Bank (AfDB) was approved by creditors in Lima, Peru, on the sidelines of the two institutions’ annual meetings.
Responding to questions from journalists on Zimbabwe’s plan, Antoinette Sayeh, IMF director (African Department), said the arrears had to be cleared for Zimbabwe to access new financing.
Zimbabwe owes the three international financial institutions $1,8 billion. The IMF is owed $110 million, the World Bank ($1,15 billion) and AfDB ($601 million).
“So it is a priority for the Zimbabwean authorities to, as quickly as possible, try to clear the arrears to international financial institutions as a first step in being able to access new financing that is so desperately needed for Zimbabwe to make progress on economic and social issues,” Sayeh said.
She said Zimbabwe’s proposals were being worked on and there “is the discussion of bridge financing that would be available to clear the arrears to the World Bank and the African Development Bank and possible use of Zimbabwe’s SDR [special drawing rights]holdings to pay the arrears to the IMF”.
“Details are still being worked on, but all in all, these options were looked upon favourably in the meeting we had and were seen as feasible to put in place,” Sayeh said.
She said Zimbabwe still has the task of demonstrating a strong track record of reforms under the 15-month IMF’s Staff Monitored Programme (SMP). The second SMP review was done in September and Zimbabwe met the quantitative benchmarks. The final review will be done next year.
“And if performance continues to be very good under that programme, our hope is that the process of clearing the arrears proceeds and that it could be possible by the middle of next year to see Zimbabwe clear its arrears to all of the IFIs and thereby being able to benefit from new financing from them,” Sayeh said.
“But a very important next step will also be, of course, beginning the discussion with bilateral creditors about how the debt to them will be dealt with.”
Zimbabwe requires long-term financing to help reboot the economy but is hamstrung by the external debts which have locked the flow of international capital.
Cumulatively, Zimbabwe’s public and publicly-guaranteed debt stood at $8,4 billion as at end of June 2015.
Finance minister Patrick Chinamasa said last week that Zimbabwe would ride on the successful clearance of arrears to the preferred creditors to engage the European Investment Bank, the Paris Club and non-Paris Club bilateral creditors for debt resolution.