The Government of Zimbabwe has, since 2021, made cumulative token payments of US$125,8 million as of September 2023, to its external creditors as a sign of its commitment to clearing its arrears and debts running into billions of US dollars.
Cumulative payments made to the World Bank amounted to US$70 million, African Development Bank Group (US$37.4 million), European Investment Bank (US$5.6 million) and to each of the 16 Paris Club bilateral creditors (US$12.8 million).
As it stands, the government pays US$1 million to the World Bank Group, US$500 000 to the African Development Bank Group, US$100 000 to the European Investment Bank and US$100 000 to each of the 16 Paris Club bilateral creditors every quarter.
This was revealed by the Head of the Public Debt Management Office, Andrew Bvumbe at the Zimbabwe high-level dialogue on arrears clearance and debt resolution breakfast meeting in Harare on Thursday.
The Government of Zimbabwe earlier in 2022, formulated an arrears clearance, debt relief and restructuring strategy that outlines the Government’s position and options for addressing the country’s debt distress situation including outlining the comprehensive reform agenda that underpins the process.
Championed by African Development Bank president, Dr Akinumwi Adesina and former Mozambican president, Joaquim Chissano, who was designated as the high-level facilitator, the initiative, which includes the adoption of the traditional debt resolution strategies, is a hybrid debt strategy, combined with leveraging of the country’s natural resources to achieve sustainable economic development.
The country’s debt continues to weigh heavily on development efforts and has prevented it from accessing long-term lines of credit from international financial institutions.
“Our total external debt which is both public and publicly guaranteed as of September 2023 stands at US$12,5 billion including the Reserve Bank of Zimbabwe liabilities of US$3,4 billion,” said Bvumbe.
He said including the domestic debt of US$5 billion the total debts currently stand at approximately US$18 billion. In addition, the government, through treasury also assumed all of the RBZ external loans and all the external liabilities would be funded transparently through the national budget.
“Most of this debt, roughly over 65 percent, is made up of penalties, principal arrears and interest arrears. We are hardly getting any new financing from the traditional financiers therefore the structure calls for serious dialogue,” he said.
To achieve meaningful debt clearance and sustainable economic growth, African economies, Zimbabwe included, must prioritise fiscal discipline and good governance.
Effective management of public finances, including transparent and accountable use of funds, is critical for debt clearance and long-term economic stability.
Implementing sound macroeconomic policies, such as reducing budget deficits, enhancing public financial management systems, also play a role in instilling investor confidence and creating an enabling environment for growth.
“The Government is currently in the process of establishing a comprehensive database on Bilateral Investment Promotion and Protection Agreements (BIPPAs) and has started direct engagements with some affected BIPPA countries including Germany, Netherlands, South Africa and Switzerland.
“Government has engaged the African Legal Support Facility for technical assistance in drafting bankable and transferable 99-year leases,” said Bvumbe.
A BIPPA is a legal instrument, an agreed basis for resolution of any conflict, that establishes specific rights and obligations to meet the primary purpose of protecting foreign investments against discriminatory measures by the host country.
BIPPAs are an arrangement designed to encourage investor confidence by setting high standards of investor protection and compensation measures applicable in international law.
Fostering an enabling environment for investment and trade will contribute to the long-term economic prosperity of an economy and it is paramount that African governments, Zimbabwe in particular, in partnership with international institutions and regional bodies, continue to prioritize debt clearance and implement comprehensive measures to ensure economic growth, poverty reduction, and overall development.