Cash strapped Zim govt engages creditors over debt

HARARE - Cash strapped Zimbabwe government is negotiating with external creditors over its gigantic debt but has ruled out its swift clearance owing to serious economic challenges, Daily News reported
on Sunday.

Zimbabwe's external debt is estimated to be $6,1 billion.

"We are negotiating with creditors and the development partners for arrears clearance, debt relief and new financing. We do not have the capacity to clear our debts without re-engaging with these key partners," said Finance minister Patrick Chinamasa in his 2014 national budget presentation last week.

Last month Chinamasa had meetings with officials from the international financial institutions where he noted that the continued accumulation of external debt payment arrears was seriously undermining the country's creditworthiness.

"We are currently paying token payments per month towards those arrears and as the bankers here will know, it will take us a lifetime or rather more than a lifetime to clear those arrears.

"We also said to them for the first that whilst we are in this situation as a cost to our reassertion of our rights over our natural resources, we have enormous potential as country.

"In fact they said Zimbabwe is among the top  five countries that are going to be a target of international inflows of  investment if we play our cards right and put our act together," said Chinamasa.

Currently government is engaging International Monetary Fund (IMF) and World Bank towards revising the country's debt overhang but has no capacity to pay the principal debt and global financiers are in agreement.

He added that "following the conclusion of a validation and reconciliation exercise of Zimbabwe's public and publicly guaranteed external debt database with all creditors' total debt as at 31st December 2012 stood at $6,1 billion, not the $10 billion that is being touted about."

This was severely compromising the country's ability to secure new financing from both bilateral and multilateral sources.

Zimbabwe is currently under a Staff Monitored Programme (SMP) ' an informal agreement to monitor the government's economic programme but that does not involve financial assistance ' which meant that the country is unable to access the benefits of membership for concessionary lending or borrowing creating a standstill with the global financiers.

"I have been putting these ideas to them that a creditor who wants to be paid will certainly capacitate the debtor to build his capacity so that he can pay back.

"We need to be capacitated and we need new money," said Chinamasa.

He noted that the Bretton Woods institution was not in disagreement with that position but was bound by rules and that they were not flexible.

"We now have to speak the language that will attract that capital. We have to behave in a manner that will make Zimbabwe an attractive destination for capital inflows," said Chinamasa.

The IMF team began talks with government officials early last month amid signs that President Robert Mugabe could take a more accommodating approach to the ownership of foreign companies.

It was the first visit by an IMF team since Mugabe and his Zanu PF party won the disputed July 31 election with a mandate to kick-start the flagging economy and pledges to push ahead with controversial indigenisation policies.

However, the government and IMF are still not likely to find it easy to reach an agreement on budgetary issues, given Zanu PF's expansionist election campaign manifesto that included a commitment to raise civil service salaries whose plight they failed to address in the recently announced 2014 national budget.