News / National
Zimbabwe lines up seven sponsors to clear arrears
23 Mar 2025 at 08:13hrs | Views
Zimbabwe is actively negotiating with seven potential sponsors, including individual countries, multilateral financial institutions, and private financiers, to secure the necessary funding, guarantees, and technical support to clear its external arrears. The arrears clearance is a key component of the government's broader strategy to resolve its outstanding external debt obligations.
The process is expected to begin after the completion of the International Monetary Fund (IMF) Staff-Monitored Programme (SMP), which is slated to be signed off by the end of March 2025. This nine-month programme is a critical phase in Zimbabwe's debt resolution strategy, designed to establish a track record of sound economic governance that will be essential for unlocking affordable external financial assistance.
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube confirmed in an interview with The Sunday Mail that discussions with potential sponsors are ongoing. He noted that the clearance of the country's arrears, estimated at approximately US$7.5 billion, will only commence after the successful completion of the SMP.
"The negotiation of the SMP with the IMF is well underway," said Prof Ncube. "Once we finalize that process, we will proceed with the arrears clearance after the nine-month programme is completed. The SMP is a prerequisite for this process."
The SMP, which is an agreement between a country and the IMF, ensures that the country adheres to economic policies and reforms that demonstrate fiscal discipline, paving the way for future financial assistance.
While Zimbabwe works towards the finalisation of the SMP, it is also engaging with potential sponsors to provide short-term financing to help clear the arrears. These "bridge loans" will allow Zimbabwe to settle its outstanding debts and unlock future funding. According to Prof Ncube, the government has already approached three of the seven targeted sponsors and is in discussions about providing the necessary bridge loans.
"A financial sponsor is typically a country that can extend a bridging loan to enable the country to clear its arrears. We are currently in talks with several potential sponsors, and I have already met with three finance ministers from different countries," he added. "However, we can only disclose the names of the sponsors once they have agreed to the arrangements."
Zimbabwe's debt resolution strategy involves securing sponsor-backed financing, which may come from bilateral loans or other financial mechanisms, to fulfill the country's obligations to international creditors. In exchange, Zimbabwe will implement specific reforms or policy changes as part of the agreement.
The government's debt resolution efforts are part of the Arrears Clearance and Debt Resolution Programme launched in 2022, which seeks to address Zimbabwe's long-standing external debt challenges. The primary goal is to clear arrears owed to multilateral and bilateral creditors, including the World Bank, the African Development Bank (AfDB), and the Paris Club, and restore normal financial relations with international financial institutions.
As part of this program, Zimbabwe has committed to implementing a three-pronged strategy: economic reforms to ensure fiscal discipline and macroeconomic stability; governance reforms to improve transparency and public sector efficiency; and resolving legacy issues, such as compensating white former commercial farmers whose land was expropriated during the Land Reform Programme.
To date, over 500 former farm owners have begun receiving compensation, marking a significant step in addressing these legacy disputes. The government has approved payments to 57 former farmers who owned farms protected under Bilateral Investment Promotion and Protection Agreements (BIPPAs), and 444 farms have been cleared for compensation under the Global Compensation Deed (GCD).
Zimbabwe has also allocated significant funds for the compensation process, with US$331.7 million set aside for the 444 farms under the GCD. The compensation process will be carried out over a period of up to 10 years, ensuring it aligns with the country's fiscal capacities.
In a bid to support the country's debt resolution efforts, former Mozambican President Joachim Chissano and AfDB President Dr. Akinwumi Adesina have been appointed lead facilitators of the Arrears Clearance and Debt Resolution Programme. Last week, they met with President Emmerson Mnangagwa at State House in Harare to review progress and discuss next steps. Dr. Adesina reassured President Mnangagwa that the AfDB remains committed to supporting Zimbabwe's efforts.
"We have a clear timeline in place," Dr. Adesina said. "We have engaged global financial and legal advisory firms to support Zimbabwe, and we are working towards securing the bridge financing framework to clear Zimbabwe's arrears."
Former President Chissano expressed optimism about the progress being made, noting that Zimbabwe was on track to see tangible results soon.
As of September 2024, Zimbabwe's external debt stock stood at US$12.4 billion, with US$6.3 billion owed to bilateral creditors and US$3.2 billion owed to multilateral institutions. The Reserve Bank of Zimbabwe liabilities assumed by Treasury in 2023 amounted to US$2.9 billion.
Countries such as Greece, Zambia, and Sri Lanka have successfully utilized sponsor-backed financial agreements in the past to manage their debt crises. Zimbabwe's efforts reflect a growing commitment to fiscal reforms and a renewed focus on restoring financial stability and access to global markets.
As discussions with potential sponsors continue, Zimbabwe is determined to move forward with its debt resolution strategy, clearing its arrears and strengthening its economic governance to unlock the much-needed external financial assistance.
The process is expected to begin after the completion of the International Monetary Fund (IMF) Staff-Monitored Programme (SMP), which is slated to be signed off by the end of March 2025. This nine-month programme is a critical phase in Zimbabwe's debt resolution strategy, designed to establish a track record of sound economic governance that will be essential for unlocking affordable external financial assistance.
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube confirmed in an interview with The Sunday Mail that discussions with potential sponsors are ongoing. He noted that the clearance of the country's arrears, estimated at approximately US$7.5 billion, will only commence after the successful completion of the SMP.
"The negotiation of the SMP with the IMF is well underway," said Prof Ncube. "Once we finalize that process, we will proceed with the arrears clearance after the nine-month programme is completed. The SMP is a prerequisite for this process."
The SMP, which is an agreement between a country and the IMF, ensures that the country adheres to economic policies and reforms that demonstrate fiscal discipline, paving the way for future financial assistance.
While Zimbabwe works towards the finalisation of the SMP, it is also engaging with potential sponsors to provide short-term financing to help clear the arrears. These "bridge loans" will allow Zimbabwe to settle its outstanding debts and unlock future funding. According to Prof Ncube, the government has already approached three of the seven targeted sponsors and is in discussions about providing the necessary bridge loans.
"A financial sponsor is typically a country that can extend a bridging loan to enable the country to clear its arrears. We are currently in talks with several potential sponsors, and I have already met with three finance ministers from different countries," he added. "However, we can only disclose the names of the sponsors once they have agreed to the arrangements."
Zimbabwe's debt resolution strategy involves securing sponsor-backed financing, which may come from bilateral loans or other financial mechanisms, to fulfill the country's obligations to international creditors. In exchange, Zimbabwe will implement specific reforms or policy changes as part of the agreement.
The government's debt resolution efforts are part of the Arrears Clearance and Debt Resolution Programme launched in 2022, which seeks to address Zimbabwe's long-standing external debt challenges. The primary goal is to clear arrears owed to multilateral and bilateral creditors, including the World Bank, the African Development Bank (AfDB), and the Paris Club, and restore normal financial relations with international financial institutions.
As part of this program, Zimbabwe has committed to implementing a three-pronged strategy: economic reforms to ensure fiscal discipline and macroeconomic stability; governance reforms to improve transparency and public sector efficiency; and resolving legacy issues, such as compensating white former commercial farmers whose land was expropriated during the Land Reform Programme.
To date, over 500 former farm owners have begun receiving compensation, marking a significant step in addressing these legacy disputes. The government has approved payments to 57 former farmers who owned farms protected under Bilateral Investment Promotion and Protection Agreements (BIPPAs), and 444 farms have been cleared for compensation under the Global Compensation Deed (GCD).
Zimbabwe has also allocated significant funds for the compensation process, with US$331.7 million set aside for the 444 farms under the GCD. The compensation process will be carried out over a period of up to 10 years, ensuring it aligns with the country's fiscal capacities.
In a bid to support the country's debt resolution efforts, former Mozambican President Joachim Chissano and AfDB President Dr. Akinwumi Adesina have been appointed lead facilitators of the Arrears Clearance and Debt Resolution Programme. Last week, they met with President Emmerson Mnangagwa at State House in Harare to review progress and discuss next steps. Dr. Adesina reassured President Mnangagwa that the AfDB remains committed to supporting Zimbabwe's efforts.
"We have a clear timeline in place," Dr. Adesina said. "We have engaged global financial and legal advisory firms to support Zimbabwe, and we are working towards securing the bridge financing framework to clear Zimbabwe's arrears."
Former President Chissano expressed optimism about the progress being made, noting that Zimbabwe was on track to see tangible results soon.
As of September 2024, Zimbabwe's external debt stock stood at US$12.4 billion, with US$6.3 billion owed to bilateral creditors and US$3.2 billion owed to multilateral institutions. The Reserve Bank of Zimbabwe liabilities assumed by Treasury in 2023 amounted to US$2.9 billion.
Countries such as Greece, Zambia, and Sri Lanka have successfully utilized sponsor-backed financial agreements in the past to manage their debt crises. Zimbabwe's efforts reflect a growing commitment to fiscal reforms and a renewed focus on restoring financial stability and access to global markets.
As discussions with potential sponsors continue, Zimbabwe is determined to move forward with its debt resolution strategy, clearing its arrears and strengthening its economic governance to unlock the much-needed external financial assistance.
Source - the sunday mail
