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Oliver Kazunga Senior Business Reporter
THE business community has commended the government for coming up with an external debt clearance strategy saying this will go a long way in unlocking opportunities for new credit lines.

The country’s economy is in dire need of fresh liquidity for retooling and increasing domestic production capacity across sectors. Zimbabwe owes external debtors $10.8 billion of which $6.8 billion is public debt with the remainder being private sector loans.

Finance Minister Patrick Chinamasa presented Zimbabwe’s debt clearance strategy in Lima, Peru, last week to settle $1,15 billion to the World Bank, $601 million to African Development Bank (AfDB), and the International Monetary Fund (IMF) $110 million by end of April next year.

Business organisations have hailed the move.

The Zimbabwe National Chamber of Commerce chief executive officer Chris Mugaga said the government decision would unlock opportunities and boost investor confidence.

“The move is quite commendable. If the government honours its commitment, that can open up new opportunities for credit lines and a robust money market. The non-servicing of the country’s external debt is one of the factors that has been killing the development of a robust money market in the country,” he said.

In Lima, the government presented a strategy that entails clearing Zimbabwe’s external payment arrears with the international financial institutions.

This will be done through a combination of using the country’s own resources, arrangement of bridge finance with regional and international banks and the usage of bilateral loan facilities.

The strategy thus involves developing a new comprehensive country financing programme supported by AfDB, IMF and World Bank that attracts long-term financing to promote growth and sustainability.

The country financing programme should also foster the engagement of the European Investment Bank, the Paris Club, and non-Paris Club bilateral creditors for debt resolution on the strength of Zimbabwe’s performance.

Confederation of Zimbabwe Industries president Busisa Moyo said the debt clearance strategy restores confidence with the international community.

“One of the country’s biggest challenges is confidence. The debt clearance strategy restores confidence with the international community, that we’re an honourable country. We acknowledge and repay our dues, and when we’ve a challenge repaying or fall into arrears we doggedly seek creative solutions to repay and honour our obligations,” he said.

“The government, private sector, labour and civic society will have to pull together and make tough calls and embark on austerity measures to achieve this target (clearing the debt by end of April). In terms of specifics there seems to be a credible and robust plan that includes a grant from the AfDB, access to our Special Drawing Rights and fiscal reforms. We believe that revenue side interventions and reforms like attracting Foreign Direct Investment (FDI), improving revenue collection by the Zimbabwe Revenue Authority, improving the cost and ease of doing business, utility cost correction, export generation, import dissuasion (buying local), harnessing diaspora remittances into creative revenue enhancing programmes versus consumption will also go a long way.”

Moyo said industry believes the country’s debt strategy would remove perceptions that Zimbabwe is a bad counterparty and a risky investment destination.

“Once relations with the IMF and World Bank are normalised there are a lot of followers who come behind them and we’re likely to see more FDI flowing in if we adopt clear and mutually beneficial policies,” he said.

Moyo said success in re-engaging with international creditors would unlock a new level of positive goodwill, cordial perception and ultimately FDI to the country.

The Association for Business in Zimbabwe chief executive officer Lucky Mlilo said: “To just kick start economic growth, financial inflows and accelerated efforts to engage with international financial institutions are critical as they will open up new opportunities for credit lines. So the move by the government shows the determination and efforts that the country is making to clear its debt and this is commendable”.

He said to promote economic growth, Zimbabwe requires offshore support and the IMF has indicated that the country should clear its arrears.

Zimbabwe has not been able to repay its debt due to the constrained fiscal space in the wake of sanctions that were imposed on the country at the turn of the millennium.