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Zimbabwe won't get international Covid-19 rescue package

by Staff reporter
19 Jun 2021 at 14:03hrs | Views
ZIMBABWE will not receive a dime from a multi-billion-dollar facility organised by international financial institutions which seeks to help countries of the global South in dealing with the socio-economic impact of the Covid-19 pandemic due to non-payment of arrears to lenders, the World Bank has said.

Covid-19 pandemic has led to an unprecedented economic crisis worldwide, with disastrous social consequences. After 25 years of continuous growth, Africa is severely hit and suffered a recession in 2020.

The southern African nation defaulted on arrears payments at the turn of the millennium, resulting in the failure to access long-term funding for multilateral lenders such as the World Bank, International Monetary Fund and the African Development Bank.

Official figures show that public and publicly guaranteed external debt stood at 83% of the Gross Domestic Product (GDP) in 2019, of which 61% of GDP was external arrears. Domestic debt financing is limited due to shallow financial markets and negative real interest rates, which discourage lending.

According to the latest World Bank economic update on Zimbabwe, although management of central government finances improved in 2019, sizeable contingent liabilities coupled with a considerable debt burden and limited access to concessional financing continue to limit the country's ability to clear arrears.

"Government's ability to respond to the pandemic is constrained by limited access to concessional sources of financing. External debt arrears that reached 78 percent of external public debt in 2020 have prevented Zimbabwe from benefitting from finance from International Financial Institutions (IFIs) and global initiatives, such as the global Debt Service Suspension Initiative (DSSI). The DSSI is intended to suspend debt payments from the poorest countries to official bilateral creditors based on countries' requests for forbearance, with a view to providing immediate liquidity to tackle challenges posed by Covid-19," the World Bank said.

"IFIs have also put in place programmes to assist in the Covid-19 response, including procurement of PPEs, vaccinations, however Zimbabwe is not eligible for this support due to arrears. The GoZ has therefore opted for collateralised external borrowing on commercial terms, which may complicate future arrears clearance operations.

"Given Zimbabwe's inability to access IFI finance, spending on those affected by the pandemic was considerably lower than in other developing countries, impacting both households and the private sector (small and medium enterprise), and further exacerbating poverty and impeding livelihoods."

This comes after The NewsHawks last month reported that Zimbabwe could lose out on a French-backed US$650 billion economic support programme under which the world's advanced economies are expected to parcel out part of their International Monetary Fund Special Drawing Rights (SDR) to shore up developing countries currently reeling from the impact of Covid-19.

In May, France hosted the Paris summit on supporting African economies after the Covid-19 pandemic caused economic shocks on the continent. Paris took the lead and made a firm commitment to lobby advanced economies to parcel out part of their SDR to weaker economies.

A declaration of the document which was seen by The NewsHawks shows that Zimbabwe, which badly needs financing to stabilise its economy, was conspicuous by its absence at the Paris Summit which was attended by Francophone, Saxophone and Lusophone countries this week.

Countries which adopted the declaration included:  Algeria, Angola, Belgium, Benin, Burkina Faso, Cameroon, Canada, China, Comoros (a Chinese ally which counterbalanced Russian and Indian influence in the Indian Ocean), Congo, Democratic Republic of Congo, Ivory Coast, Egypt, Ethiopia, France, Germany, Ghana, Italy, Japan, Kenya, Mali, Mauritius, Mauritania, Morocco, Mozambique, Netherlands, Niger, Nigeria, Portugal, Rwanda, Saudi Arabia, Senegal, Spain, South Africa, Sudan, Tanzania, Chad, Togo, Tunisia, United Arab Emirates, United Kingdom, United States of America, Zambia.

The summit was also attended by the chairperson of the African Union, the chairperson of the African Union Commission, the president of the European Council and the president of the European Commission.

Meanwhile Zimbabwe has made token payments to the IFIs as the country seeks full re-engagement with its creditors.

"Regarding financial re-engagement, the IMF Staff visits were concluded. Payments to the following institutions have been made:World Bank, US$1 million; AfDB USD0.5 million and European Investment Bank (EIB) USD0.1 million," Monica Mutsvangwa told a post-cabinet Press briefing this week.

Source - NewsHawks