eBusiness Weekly
Business Writer
Zimbabwe is set to miss out on a US$2,3 billion World Bank facility because of its failure to service its debts with global lenders, Business Weekly has established.
The World Bank recently approved a US$2,3 billion programme to help countries in Eastern and Southern Africa increase their resilience of the region’s food systems and ability to tackle growing food and nutrition insecurity.
Food system shocks brought on by extreme weather, pest and disease outbreaks, political and market instability, and conflict are becoming more frequent and severe, putting more people at risk of food insecurity.
The war in Ukraine is further exacerbating these effects by disrupting the global food, fuel, and fertiliser markets.
As a result, an estimated 66,4 million people in the region are projected to experience food stress or a food crisis, emergency, or famine by July 2022, according to the World Bank.
Zimbabwe has not been spared from these devastating global events and could do with the support that the World Bank is extending to affected countries.
In the agriculture sector, activities were affected by poor rainfall distribution which, according to the Ministry of Finance and Economic Development in its 2022 First Quarter Treasury Bulletin, has the potential to compromise the attainment of the projected 5,5 percent growth of the economy this year.
Finance and Economic Development Minister, Professor Mthluli Ncube, this week while addressing journalists, admitted hopes of achieving 5,5 percent growth was fast fading away and would announce new and revised targets next month when he presents mid-term budget review.
“Agriculture activities were affected by the erratic rainfall pattern, which resulted in the write-off of the early planted crops. The country experienced wetter than usual conditions resulting in floods in some areas and later experienced a long dry spell during the period mid-February to end of March 2022,” reads part of the Treasury Bulletin.
In addition, the socio and economic situation in the country was compounded by “adverse developments on the global economy owing to geopolitical tensions resulting in higher commodity prices and supply chains disruptions”.
These developments have added to broad-based imported inflation in an economy already suffering from the effects of a poor rain season.
To address these risks, the World Bank has put in place the Food Systems Resilience Programme for Eastern and Southern Africa (FSRP Facility) which is meant to enhance inter-agency food crisis response strategies—including strengthening early warning systems and rapid response planning, emergency support to producers, emergency trade measures, emergency food reserves—and will include a Contingent Emergency Response Component (CERC) to provide agile, rapid funding.
“This is the first regional and multi-sectoral operation focusing on reducing the number of food-insecure people in Eastern and Southern Africa by increasing the resilience of food systems and preparedness to combat rising food insecurity. It supplements a similar programme that the Bank approved recently for Western and Central Africa,” said Hafez Ghanem, World Bank Vice President for Eastern and Southern Africa.
“Ensuring regional coordination in addressing the challenges posed by climate change, market volatility, and the need for food policy reform constitute key priorities.”
“While climate-induced shocks to the food system used to occur once every 10 years on average, they are now occurring every 2.5 years. This is too frequent for countries, regions, or farms to sufficiently recover between the shocks, and therefore investing in food systems resilience is key to allowing the region to act on food systems challenges in more cooperative and effective ways,” said Boutheina Guermazi, World Bank Director of Regional Integration Africa, the Middle East and North Africa.
However, Zimbabwe is set to miss out on this facility according to Mr Holger Kray who is the Practice Manager for Agriculture and Security.
Kray said Zimbabwe does not qualify for the FSP Facility because of ‘its nonaccrual status.’
A country assumes nonaccrual status if payment of debt in full of principal or interest is not expected, or if principal or interest has been in default.
Zimbabwe’s public external debt stock was estimated at US$13,2 billion as per the 2022 National Budget Statement.
Of that external debt, US$5,45 billion is owed to bilateral creditors while US$2,67 billion is owed to multilateral creditors.
A total of US$5,18 billion of the non-guaranteed debt is in arrears while US$1,4 billion of guaranteed debt is in arrears. The country has not been able to service this debt for years and has only started making token payments to lenders.
However, this is not enough to unlock new facilities.
‘Due to its nonaccrual status, Zimbabwe is currently ineligible to receive funding from International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA), said Kray.
‘Zimbabwe’s participation in future phases will be subject to the country becoming eligible for IBRD/IDA financing,’ he added.
In an effort to clear its arrears, Zimbabwe has over the years worked on an arrear clearance strategy that Mthuli said was “complete”.
Addressing the second virtual briefing of national Covid-19 taskforce members, diplomats and international cooperating partners, in September last year, Mthuli said the country has been “working on it with the World Bank specifically and a bit with the IMF. Those two institutions have been privy to what we have been working on in terms of strategy for arrears clearance”.
Zimbabwe is also reportedly discussing a new International Monetary Fund Staff Monitored Programme or SMP for Zimbabwe. SMPs are informal agreements between country national authorities and International Monetary Fund (IMF) staff to monitor the authorities’ economic programme.
African Development Bank Group (AfDB) president Akinwumi Adesina said in early June that the bank was assisting the government to come up with an arrears clearance plan.
Adesina said AfDB was working with its shareholders and bilateral partners such as the IMF and the World Bank to help Zimbabwe extricate itself from the debt the same way they had assisted Sudan and Somalia.
