Zimbabwe's debt-shifting gamble brings it out of the cold

Zimbabwe's President Robert Mugabe
Zimbabwe's President Robert Mugabe Reuters/Philimon Bulawayo

Zimbabwe's Finance Minister Patrick Chinamasa told RFI he was desperately searching for credit on a visit to Paris on Thursday. He talked to business leaders about investment opportunities to revive the country's struggling economy. He also met with financial lenders at the Paris Club to conclude a deal on repaying almost two billion dollars of arrears. 


If finalised, the debt deal would signal Zimbabwe's return to financial markets after almost two decades.

The agreement to repay some 1.86 billion dollars of arrears to lenders such as the IMF, World Bank and African Development Bank, has however been met with scepticism in Zimbabwe, currently gripped by economic hardship.

"Right now we have such a massive liquidity shortage that you can't even get money out of the banks," economist John Robertson told RFI by phone.

"The government did an immense amount of damage ... through its land reform policies and indigenisation law, but it has never wanted to admit they did any damage at all."

The indigenisation law has been blamed by economists for the country's low foreign direct investment (FDI). Under its terms, companies must give away 51 percent of their ownership to empower indigenous Zimbabweans.

"It's for this reason no one is coming to Zimbabwe and those companies that are here have not recovered," says Robertson.

Chinamasa - 'We literally have nothing'

This poor economic outlook may have spurred Finance Minister Patrick Chinamasa's visit to Paris on Thursday.

"I am of course looking for increased lines of credit," he told RFI. "We've had some French state enterprises who are in the financial sector giving support to our productive sectors through our commercial banks and I've come to solicit and also ask that those lines of credit are increased."

So how much credit was he looking for?

"You know there's no limit,' Chinamasa replied. "Right now we literally have nothing, so to speak. Our strategy is to achieve private-sector-driven growth in the areas of agriculture, manufacturing, tourism, mining and our biggest challenge at the moment is that we do not have sufficient lines of credit."

International finance may help President Robert Mugabe's government meet its obligations to the Zimbabwean people, not a negligeable consideration given that fresh elections are to take place in 2018.

But repaying the arrears to obtain further credit will require more potentially sensitive measures, including public-spending cuts. There is limited appetite for that right now especially as most salaries are not getting paid. Teachers, particularly in rural areas, have not been paid for weeks.

"I don't think we would qualify for any more loans," Robertson reckons. "Zimbabwe needs to prove that it can handle more debt, but the fact that we are in arrears in the first place clearly proves that we can't manage the debt we already have."

Private and public debt

So how much debt are we talking about?

Currently Zimbabwe owes 10 billion US dollars to the IMF, World Bank and the African Development Bank.

"But it's important to distinguish between public-sector debt, [eight billion] and private-sector debt [two billion]," Chinamasa asserts.

"The debt we are talking about clearing is eight billion from the public sector, so we can start enjoying the benefits of our membership from the three multilateral institutions."

Chinamasa said the private sector was key to his strategy.

"The two billion private-sector debt is being serviced and everyone acknowledges that there's been no problem with the private sector to service its debt," he inisisted. "For that reason, I would want to see more resources being poured into the private sector which is in a position to service any debt which it incurs, at an affordable rate."

Experts remain unconvinced that this will contribute to "kickstarting the country's economy", as the minister hopes.

"The deadline for the debt deal was 30 June, it's now been pushed back to September," Roberston insisted.

"These arrears are just a small percentage of the total debt we already have," begging the question of how the government plans to finance the rest.

Still Zimbabwean authorities remain confident.

"We've already secured a bridging loan from Afro Exim bank to repay the African Development Bank, at least," Chinamasa reported.

"With respect to our arrears with the IMF, they owe us money on special drawing rights, so our strategy is that we will use that money to clear their debt of around 110 million."

The alleged strain that indigenisation laws are putting on the economy is "no longer an issue", according to Chinamasa. 

"Zimbabwe remains open for business," he insisted.

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