European Union backs Zimbabwe’s debt clearance plan

The European Union will support Zimbabwe’s efforts to gain approval for its strategy to repay its external arrears at a meeting of international creditors next month, but says the country must ‘walk the talk’ and implement the promised reforms which it said could be painful.

The southern African country owes foreign creditors about $10 billion and will present and seek support for its strategy for arrears clearance on the sidelines of the annual meetings of the World Bank and the International Monetary Fund in Lima, Peru, next month, which could pave way for new funding.

Zimbabwe has declined to disclose details of the plans but the head of the EU delegation, Philippe Van Damme  said today it ‘puts a lot of emphasis on improving public finance management and accelerating public enterprise reforms.’

“The reform agenda you will present to Zimbabwe’s creditors in Lima is ambitious, and demanding,” Van Damme said at a signing ceremony for five financial agreements amounting to $98 million under 11th European Development Fund.  The funds are part of the $270 million agreement signed in February this year in development assistance to support agriculture, health and institutional building.

“But you will now have to go further, walking the talk, and move to the concrete, sometimes painful, operationalisation of the promised reforms,” added Van Damme.

While Zimbabwe has started reforms in the financial sector and on the labour market, Van Damme said it still has not made enough progress in building an inclusive electoral environment while there are still issues outstanding in the application of the rule of law.

As a result, the EU still maintains “some limited, but highly symbolic restrictive measures in place” which should act as “an extra incentive to engage and find ways to lift the final obstacles to a full normalisation of relations.”

The EU lifted its 12-year suspension of direct financial aid to the government of Zimbabwe at the end of October last year but maintains restrictions on President Robert Mugabe and his wife while a state-owned arms firm also remains under an arms embargo.

“We still observe an investors’ community, attracted by the potentialities of the Zimbabwean economy, but hesitant to take the final hurdles and to pledge funding because of lack of clarity on property rights, doubts about the predictability of the legal framework and its application, and difficulties in doing business,” said Van Damme.

Finance minister Patrick Chinamasa said Zimbabwe was committed to its reform agenda, but added normalising political relations with the EU would bring more investment from the bloc.

“Without the political normalisation, the business delegations that come to Zimbabwe remain on the fence, not entirely because our environment is not right to receive them, but they get their cue from their political leaders,” said Chinamasa.

“Until normalisation of political relationships, I do not think we will see many investors from Europe coming to Zimbabwe. Once that is sorted my belief is that they will come off the fence and invest in Zimbabwe. I believe they have already made up their minds where they want to invest.”

He said the mission to Italy, Germany, France and Brussels (Belgium) led by central bank governor John Mangudya to seek support for the debt strategy, had gone well and that “Europe should be fighting in Zimbabwe’s corner.”- The Source

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