Zimbabwe could get bridging finance to clear its arrears to international financial institutions

Zimbabwe could obtain bridging finance to clear its arrears with the World Bank and the African Development Bank and use its special drawing rights holdings to pay its arrears to the International Monetary Fund, the Africa director of the IMF Antoinette Sayeh said last week.

Responding to questions soon after Zimbabwe’s Finance Minister Patrick Chinamasa announced that international creditors had endorsed Harare’s strategy to clear its arrears and would do so by the end of April next year.

Zimbabwe’s arrears to the World Bank are $1.15 billion, followed by the AFDB which stands at $601 million and IMF at $110 million.

“..the details of those proposals are still being worked out,” Sayeh said. “Of course, there is the discussion of a bridge financing that would be available to clear the arrears to the World Bank and the African Development Bank and possible use of Zimbabwe's SDR holdings to pay the arrears to the IMF. Details are still being worked on, but all in all, these options were looked upon favorably in the meeting we had yesterday and were seen as feasible to put in place.

“Of course that would just be one step in the process of getting more resources for Zimbabwe. Zimbabwe still has the task of demonstrating a strong track record of reforms. That's what the staff monitoring program is trying to help it to do. The second review of the staff monitored program was recently done. The third review will take place in the first quarter of 2016. And if performance continues to be very good under that program, our hope is that the process of clearing the arrears proceeds and that it could be possible by the middle of next year to see Zimbabwe clear its arrears to all of the IFIs and thereby being able to benefit from new financing from them. But a very important next step will be also of course beginning the discussion with bilateral creditors about how the debt to them will be dealt with.”

The IFIs could be under pressure to bail out Zimbabwe as China is also clearing its decks. According to The Herald, China has just introduced an international payments system that will bypass the United States system that was used to freeze payments to Zimbabwe as any international transactions in US dollars had to be cleared in the US.

The US maintains sanctions on Zimbabwe, though it maintains that these sanctions are targeted at individuals from President Robert Mugabe’s government.

The Zimbabwe Democracy and Economic Recovery Act, however, clearly states that any funds from organisations like the World Bank, IMF and AfDB, meant for Zimbabwe have to be cleared by the US president.

Sayeh transcript:

QUESTIONER: Zimbabwe announced that they have plans to pay off some debt to the IMF and the World Bank. Could (you) speak to that and also if there is talk of maybe new loans in the future when this debt is done?

MS. SAYEH: Zimbabwe and its international financial institution partners and bilateral partners met yesterday here to discuss recent developments in Zimbabwe and progress on the reform program that the Zimbabwean authorities are implementing in the context of a staff monitored program, an IMF staff monitored program that Zimbabwe is implementing. As you know, Zimbabwe has significant arrears to the international financial institutions and to the international community as a whole that makes additional financing to Zimbabwe impossible. So it is a priority for the Zimbabwean authorities to, as quickly as possible, try to clear the arrears to international financial institutions as a first step in being able to access new financing that is so desperately needed for Zimbabwe to make progress on economic and social issues.

So the presentation yesterday was on proposals for clearing the arrears to the World Bank Group, African Development Bank Group, and the IMF. And the details of those proposals are still being worked out. Of course, there is the discussion of a bridge financing that would be available to clear the arrears to the World Bank and the African Development Bank and possible use of Zimbabwe's SDR holdings to pay the arrears to the IMF. Details are still being worked on, but all in all, these options were looked upon favorably in the meeting we had yesterday and were seen as feasible to put in place.

Of course that would just be one step in the process of getting more resources for Zimbabwe. Zimbabwe still has the task of demonstrating a strong track record of reforms. That's what the staff monitoring program is trying to help it to do. The second review of the staff monitored program was recently done. The third review will take place in the first quarter of 2016. And if performance continues to be very good under that program, our hope is that the process of clearing the arrears proceeds and that it could be possible by the middle of next year to see Zimbabwe clear its arrears to all of the IFIs and thereby being able to benefit from new financing from them. But a very important next step will be also of course beginning the discussion with bilateral creditors about how the debt to them will be dealt with.

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