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Minister Patrick Chinamasa

Conrad Mwanawashe Harare Bureau
ZIMBABWE is intensifying engagement with global creditors to seek out an accommodation on debt arrears and is targeting key international financiers on the sidelines of the annual meetings of the multilateral institutions in Lima, Peru next month.

Finance and Economic Development Minister Patrick Chinamasa expects that an accommodation with the creditors will open access to international capital.

Minister Chinamasa told a press briefing with visiting IMF Africa Group 1 Constituency executive director Chileshe Mpundu Kapwepwe that engagement is intended to get to an accommodation with the creditors so that Zimbabwe could start enjoying benefits of membership with the international financial institutions.

“The first part of the process is the engagement that we’re doing with the multilateral institutions to clear the debt arrears, not the debt. If we clear the debt arrears it puts us in a position where we can enjoy the benefits of our membership to the IMF and to the WB. So the first step is to get an accommodation with the three multilaterals,” said Minister Chinamasa.

He expects that such an accommodation on debt arrears could provide a stepping stone to engage bilateral creditors under the Paris Club, an informal group of creditors who provide debt treatments to debtor countries in the form of rescheduling.

“When we do so this opens up engagement with the Paris Club, bilateral creditors, mostly from Western countries and this will also open up engagement with bilateral creditors outside the Paris Club such as China,” said Minister Chinamasa.

The country’s debt arrears to the three multilaterals, the International Monetary Fund, World Bank and African Development Bank currently stands at $1.8 billion.

As at the end of June, Zimbabwe’s public and publicly guaranteed debt stood at $8.4 billion. This comprises external debt of $6.7 billion, representing about 47 percent of GDP, and domestic debt of $1.7 billion.

Zimbabwe owes bilateral creditors $3.5 billion including arrears, Paris Club $2.8 billion, non-Paris Club $709 million, multilateral creditors $2.57 billion while the Reserve Bank of Zimbabwe owes external creditors $587 million.

The engagement with the international financiers is part of a bigger strategy to deal with the debt overhang which has hindered Zimbabwe from accessing international capital.

“We’re working out a strategy to meet all creditors, multilateral, bilateral and Paris Club on the sidelines of the World Bank and International Monetary Fund meeting in Lima in October.

“We’ve also sought the attendance of the key decision makers. The effort is intended to get to an accommodation with the creditors so that we’re able to clear our arrears and put us in a position where we’re able to access capital from the international capital markets,” said Minister Chinamasa.

Kapwepwe who represents Zimbabwe’s interests on the IMF board, said she hopes the country will solve its challenges some of which include a weakening Chinese market.

China is currently the top market for commodities and a slowdown in its economy translates to reduced revenues for commodity producing countries.

“For most countries including Zimbabwe there has been a decline in commodity prices and a slowdown in the economic activity in China which is compounding the situation for commodity producers so that your revenue side is declining.

“There has also been the impact of drought on production and this is a major challenge and the underperformance in the manufacturing capacity which are all major contributors to the revenue side. The impact on commodity prices just goes to reinforce the fact that there should be further diversification of the sectors,” said Kapwepwe.

China at the moment is the biggest market for commodities and a slowdown in its economy will naturally affect the prices of the products into their market.

“These are some of the major challenges which remain for this country and we hope that this should be addressed in terms of stronger support for instance on the revenue side,” she said.

Minister Chinamasa said as a counter measure, Zimbabwe is trying to ramp up volumes to compensate for the declining prices.