G7 package to clear Zimbabwe's US$1,3bn WB debt

Government has started token payments to multilateral institutions and plans to borrow from the G7 Community to clear the outstanding US$1,3 billion to the World Bank, according to Finance and Economic Development Minister Mthuli Ncube.

The country is saddled with a foreign debt of up to US$8 billion, which continues to frustrate efforts to secure new lines of credit for the economy as it heightens country risk.

Minister Ncube revealed this while responding to questions in Parliament on Wednesday.

He also said Government was taking bold steps to reduce its domestic debt.

"We are taking measures to reduce the debt. On the domestic front, between January and April, we have paid off part of the domestic debt. We have spent about RTGS$300 million to pay off the domestic debt and we will continue to reduce it," he said.

"On the foreign debt, I must say that we have begun to make token payments to the World Bank, European Investment Bank and African Development Bank."

Prof Ncube said the country was on a roadmap to clear external areas and the process involved coming up with the Transitional Stabilisation Programme (TSP), which had already been approved by external creditors.

"They (external creditors) did that in Bali in October last year. There was a need for us to sign up on a Staff Monitored Programme with the IMF (International Monetary Fund). The Staff Monitored Programme is the only door through which we have to walk in order to deal with our arrears clearance programme.

"The Lima plan that was put in place was not accepted by the creditors as it was in terms of structure and architecture, so we have a new plan now, which involves the Staff Monitored Programme  . . . , at that moment, we will then seek a bridge loan from the G7 community for us to breach the gap because we are short of $1,3 billion.

"We will seek a bridge loan so that we can clear the arrears for the World Bank, African Development Bank and the European Investment Bank," said the Minister.

Once this is done, Prof Ncube said Government would immediately move to the last phase of the arrears clearance programme with the bilateral creditors in the Paris Club.

"I have engaged them extensively and I really mean extensively and again we are clear on that. Once we have done the IFIs (International Financial Institutions) clearance, it will even be easier to deal with the second stage because the main shareholders controlling these IFIs at that stage are the same creditors who sit in the Paris Club and again, we will be able to restructure the debt at that stage. So, we have a plan," he said.

"We are clear and I think that the first trigger point in terms of actual clearance is January 2020."

Government is leaving no stone unturned as it moves to stabilise the economy although some of the measures have been misinterpreted by some sections of the business community.

Some sections of the business community have responded by increasing prices of commodities upon introduction of some fiscal or monetary policy measures, much to the disadvantage of the general population.

However, Minister Ncube is on record that these austerity measures will not last long and by next year a number of them will be relaxed as the country starts to enter the phase of prosperity.