Zimbabwe’s foreign debt was US$13.2 billion last year, according to Treasury data. This includes US$716 million to the African Development Bank (AfDB). Between January and September last year, Zimbabwe only made token payments of US$44.2 million, reflecting how deep it remains in debt distress.
Being in arrears is one of the reasons why the country is barred from getting new loans from lenders such as the AfDB, the World Bank, and others. These loans are critical for many developing economies, which use the money for infrastructure development, to fund their budgets, and to support their currencies. Having access to these loans also opens up doors to other private lenders.
A delegation from the AfDB is in Zimbabwe this week to hold talks with the government and other stakeholders. The team, led by the bank’s VP, Yacine Fal, is coming ahead of May’s visit to Zimbabwe by bank President, Akinwumi Adesina.
The bank says Zimbabwe has asked Adesina to lead its efforts to reach a debt deal with creditors.
Here, we speak to AfDB Zimbabwe Country Manager, Moono Mupotola, on the AfDB delegation, Adesina’s visit, debt, the IMF, and the Zimbabwe economy.
Q: What were the main points in the AfDB’s discussions with the government?
Our meetings were centred around two key areas. The first is the work that the AfDB is doing in Zimbabwe, specifically providing support to the Zimbabwean government. As you know, we have a portfolio of about US$177 million, spread across 15 projects, 14 are public and one of those is in the private sector.
Really, the team has been reaffirming the commitment of the bank to working with the government of Zimbabwe to provide support, given the situation that Zimbabwe cannot borrow from the bank, so most of the support has been in grants.
This is important in light of the ongoing discussions of the African Development Fund, which is our concessional window, which countries like Zimbabwe benefit from.
The second area is to announce the visit to Zimbabwe by the President of the AfDB, Dr Akinwumi Adesina, early May. He has agreed, at the request of the Zimbabwean government, to champion the arrears clearance for Zimbabwe.
So, the high-level delegation was here to pave the way, to really look at what are the issues, talk to different stakeholders, not just to government, but also the private sector and also development partners, and put together a programme that will inform the President’s visit next month.
Q: When you say Dr Adesina will champion Zimbabwe’s debt clearance, what does that mean exactly? What is the expectation from the Zimbabwean government?
That’s what this part of the meeting was really for. It was for the Zimbabwean government to really define how they see Dr Adesina’s role. Part of it is, one; to ensure that all the parties are brought to dialogue, to chair the roundtable meeting to discuss the debt situation in Zimbabwe. So, President Adesina would be the one to chair such a meeting.
But, more detail will be availed when he comes, and that’s why he’s having this visit to get to understand what is expected of him from the Zimbabwe government.
Q: In your press release today (Thursday), you said the delegation “noted progress in Zimbabwe’s reform agenda”. In which areas exactly do you see this progress?
Well, the most notable is that Treasury has brought inflation down, it was over 800%. So, to us, that is significant progress that should be commended. Last year, there was a small current account surplus, I think it was about $1.5 billion. We saw Zimbabwe, during the COVID crisis, being one of the few countries that had very wide vaccination rates. I think you are at 30%. You were definitely in the top 10 in Africa (on vaccination rates). That, for me, is progress.
There’s been the domestic production in agriculture. We can say the good rains in 2020-2021 contributed, but there are government programmes that assisted farmers.
And also the GDP growth rate was over 5% last year. We’re projecting 4% this year. So, there are very few countries in Africa that have those (growth) rates. You can argue that those are just numbers, but if you look at them from a macroeconomic perspective, the numbers look good. So, that level of progress is something that we commend.
Q: AfDB has recently announced a US$7.5m trade finance facility for Zimbabwe. Tell us about this.
We’ve just approved a US$7.5 million guarantee instrument to CABS. Because of Zimbabwe’s situation, most corresponding banks are nervous about guaranteeing exports coming out of Zimbabwe. What this guarantee does is that it provides comfort as a trade finance instrument to corresponding banks that they will get their money.
It’s very good in that the exporters are guaranteed in receiving their dues.
Q: Why do you think those banks are reluctant to provide those guarantees, such that you have to come in, in the way you did? Is it because of sanctions?
Part of the problem is Zimbabwe’s ratings. These financial institutions provide Zimbabwe’s credit ratings, and because of the current situation – sanctions are just one part of the equation – this is a country under debt distress. So, to me the debt distress situation of the country on the financial markets – I wouldn’t call it sanctions per se – means that the country has to look for other instruments to provide comfort to corresponding banks. In this case, AfDB has stepped up to support the Zimbabwean private sector.
Q: In your press release, you also spoke about providing support to Zimbabwe for a Staff Monitored Programme from the IMF (Director General for the Bank’s Southern Africa regional development and business delivery office, Leila Mokaddem, said the Bank would discuss financial support for an SMP, potentially from its transitional support facility). How would this work?
Part of the path towards arrears clearance is that most of the bilateral partners are calling for the implementation of an SMP for Zimbabwe. One of the things that we’re very cognisant of is that implementing any IMF programme is really challenging, for the government and the population.
Our stand is to appeal to development partners to come together to support Zimbabwe in implementing this programme.
The government seems ready to implement the programme, but the measures are very tough. They have to be underwritten and underpinned by some sort of financial support, and that has to happen, I think, before the government can implement the SMP.
But that is something that the government will have to decide to do. It’s an agreement between the government of Zimbabwe and the IMF.