Zimpapers Logo

Minister Patrick Chinamasa

ZIMBABWE has secured a syndicated loan facility that will enable the country to clear $1.7 billion arrears with the World Bank and African Development Bank.

The loan will allow the country to settle $1.1 billion it owes in interest and penalties and some principal debt to the World Bank and $601 million to the AFDB.

Although Finance and Economic Development, Minister Patrick Chinamasa did not reveal the lenders, Bloomberg quoted him as saying that the rate on the loan was cheaper than that charged by the World Bank.

It is believed the loan could have been put together by the African Export-Import Bank although some suspicion points to Trafigura Group, a Singaporean global commodities firm.

“It should reduce our country-risk profile and also make us eligible for access to soft windows of those institutions — we need new inflows,” Chinamasa told Bloomberg in an interview in Nairobi, Kenya.

“It also opens up to other institutions to do business with us and also make us able to access international capital.”

Re-engagement with international financers is among Zimbabwe’s top priorities and it is hoped  this will enable the country to secure more than $2 billion in fresh lines of credit and attract foreign direct investment.

A fortnight ago Minister Chinamasa reported that Zimbabwe had met all the conditions precedent to the repayment of its debt to the World Bank and the AfDB as part of its commitment to re-engagement with the international finance bodies.

He said clearing foreign debt was crucial in addressing country risk and attracting fresh lines of credit that the economy urgently needs.

“The terms and conditions of the facilities that the Reserve Bank of Zimbabwe has put in place to repay the debt arrears to the World Bank and AfDB have been scrutinised and adjudged by the affected International Financial Institutions (IFIs) and found to be reflective of current market conditions with financing terms similar to market transactions recently concluded by several sub-Saharan African countries during 2016 and 2017,” said Minister Chinamasa.

“It is on this basis that Zimbabwe can now proceed to repay its debt arrears. Clearance of debt arrears is expected to attract in the short to medium and long term foreign and domestic investment, given perceptions of lower country risk, and would be expected to  open the door to foreign finance inflows and possible   debt treatment by the Paris Club and non-Paris Club Bilateral Creditors through an IMF financing programme.”

The country has already settled the $110 million it owed the IMF. Commenting on the cash situation, which have seen depositors spending days in queues in banking halls, Minister Chinamasa said the liquidity crisis “is temporary”, adding: “We have to find ways to make rand more available. We would like a situation where we borrow in rands from South Africa, pay back in the same currency. We will continue to engage them”.

Zimbabwe conducts 60 percent of its trade with South Africa and the business community and some experts have been calling for adoption of the rand.

The country’s economy is forecast to grow by 3.7 percent in 2017 from 1.7 percent last year, supported by agriculture, said Chinamasa.

The International Monetary Fund sees growth of two percent next year, it said in a report this week.

The country is also working on reviewing ease of doing business meant to improve the investment climate, containing the fiscal and current account deficits and organisation of state-owned enterprises.

— Bloomberg/Business Chronicle.