Zimbabwe needs a debt deal to access long-term funding for infrastructure, which it has been paying for using local resources, President Emmerson Mnangagwa has told creditors.
The country owes foreign creditors over US$12 billion, half of which is in arrears and penalties. This means Zimbabwe cannot access long-term and cheaper loans from institutions such as the World Bank and the African Development Fund, which other countries use for large infrastructure projects such as roads and dams. Instead, Zimbabwe has had to use the budget to fund infrastructure, which has stoked inflation.
Zimbabwe is talking to creditors for a deal to restructure its debt, in exchange for economic and governance reforms. Meeting diplomats from creditor countries on Monday, Mnangagwa said Zimbabwe needs an agreement so that it can access long-term loans for infrastructure.
“The funding of these (projects) is mainly through domestic resources and non-concessional external funding. This should ordinarily be funded through long-term concessional financing, including Public Private Partnerships. The successful implementation of our arrears clearance and debt resolution strategy is key for Zimbabwe to unlock new concessional external financing, critical for achieving our economic objectives,” Mnangagwa said.
As Zimbabwe transitions to the National Development Strategy 2, “access to external concessional financing will be key for long-term funding of our projects”, he said.
Of the US$12.3 billion owed to foreign creditors, multilateral lenders are owed US$3.1 billion: US$681 million to AfDB, US$1.5 billion to World Bank, and US$427m to the European Investment Bank.
Among the reforms Zimbabwe has committed to is paying compensation to white former farmers for improvements on resettled land – not the land itself – and compensating farmers who held land protected by Bilateral Investment Protection Agreements. Zimbabwe is also giving title to landowners, part of a set of proposals pushed by banks, who are part of the talks.
Progress in the talks, which started two years ago, has been slowed by concerns over the pace of reforms, with the US at one point withdrawing from the process.
AfDB president Akinwumi Adesina, who is leading the dialogue, told Monday’s meeting: “In a world of geopolitical competition and drive for securing vital strategic minerals and metals, we must look at Zimbabwe with new lenses, not lenses of the past, but lenses of the new future. These new lenses should guide us towards a strategic approach, not a retributive approach.”
Treasury Secretary George Guvamatanga told the meeting that the government is keen to conclude the talks quicker: “We were directed, during the briefing with His Excellency, that we now need to come to a conclusion. We’ve had enough of dialogue, and he now wants to see more tangible progress beyond our current conversations.”
ALSO READ |
Zimbabwe to seek ‘deep haircuts’ from creditors over $19 billion debt
Q&A | Zimbabwe asks AfDB’s Adesina to lead debt deal talks with foreign creditors
