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Prosper Ndlovu, Business Editor
ZIMBABWE is on track towards clearing close to $2 billion debt to international finance bodies, which would facilitate access to fresh lines of credit to grow her economy, Finance Ministry Secretary Willard Manungo said yesterday.

The business community has said it was pinning its hopes on the success of the Lima Agreement, signed between the government and the International Monetary Fund (IMF) last year, which lays the foundation for the debt clearance strategy in the first half of 2016.

The strategy involves clearing arrears to three multi-lateral institutions, IMF ($110 million), the World Bank ($1,15 billion) and the African development Bank ($601 million) by end of the first quarter of 2016.

Responding to questions during an interim poverty reduction strategy consultation indaba in Bulawayo, Manungo said clearing foreign debt was critical in Zimbabwe’s quest to normalise its relations with the international economic partners.

Without the support of the international financers, Manungo said economic turnaround efforts would be doomed as the country does not have the adequate capacity to generate required funding to oil its economy.

“One of our thrusts under Zim-Asset is to honour our external debt as a country. This is something we need to overcome urgently because the requirements for financing our economy are massive,” said Manungo.

“We need over $30 billion just to attend infrastructure development alone, your railways and energy development, which you’ve been complaining about. The key to that is addressing our external debt.”

He would not say how much the country has paid so far to clear its arrears but noted that on May 2, 2016, the IMF executive board concluded the Article IV consultation with Zimbabwe where it noted the country’s economic difficulties have deepened.

This has been attributed to El-Nino-induced drought, which has reduced agricultural output and disrupted hydropower production and water supplies.

The global finance body noted that economic activity in the country was severely constrained by tight liquidity conditions resulting from limited external inflows and lower commodity prices, which has seen inflation remaining in negative territory because of the appreciating US dollar — the country’s main currency.

“Zimbabwe remains in debt distress and the level of international reserves is low,” said IMF in its report.

It, however, noted that despite the adverse environment, the government has reduced the fiscal deficit in both 2014 and 2015.

“They have started to rationalise public expenditures by implementing recommendations from the 2015 civil service audit. They are also amending the Public Financial Management and Procurement Acts.

“The Reserve Bank of Zimbabwe has taken measures to restore confidence in the financial sector.

“All banks in operations now have capital buffers above the minimum requirements,” said IMF in a bold recognition of positive progress made by the country under the 18-month Staff Monitored Programme.

“The authorities have met their commitments under the Staff Monitored Program (SMP) that ended at end-December 2015, despite economic and financial difficulties.”

The country owes close to $10 billion to different creditors with about $2 billion owed to the IMF, the World Bank and the African Development Bank.

Manungo was responding to a question as to why the government was rushing for foreign funding without harnessing its vast natural resources to avert debt.

“We can’t fool ourselves as Zimbabweans because the stage in which our economy is and the savings we make locally are inadequate to deal with our development cost needs.

“At this stage we can’t say we’re doing away with external funding or lines of credit.

“We need these to complement our internal generation,” he said.

Manungo said Zimbabwe was in dire need of foreign direct investment and fresh lines of credit to rejuvenate its productive sectors.

He said a low production level across the key sectors of the economy — agriculture, mining, tourism, manufacturing and construction among others — has reduced Zimbabwe into a market for foreign products.

As such, Manungo said Zimbabwe should move away from reliance on imports to gain a competitive edge in the regional market, which he said would assist addressing liquidity problems in the economy.