Zimbabwe to seek ‘deep haircuts’ from creditors over $19 billion debt

Needing a haircut: Finance Minister Mthuli Ncube (Pic: PHILIMON BULAWAYO/REUTERS)

Zimbabwe wants steep reductions in debt values from creditors whom it cumulatively owes $19.2 billion, as part of efforts to reorganise arrears that are a weight on the economy.

“We will be looking for lots of haircuts, the removal of penalties,” Finance Minister Mthuli Ncube said in an interview on the sidelines of the African Development Bank annual meetings in Nairobi, Kenya’s capital. “We are looking for very deep haircuts.” He provided no further details of the extent of reductions sought by Zimbabwe’s authorities.

Zimbabwe’s debt at the end of December rose to $19.2 billion, according to a presentation Ncube gave at an arrears-clearance meeting. Of this amount, the nation owes external creditors $13 billion and domestic investors $6.2 billion. Previous data provided by Zimbabwe’s Treasury put the figure at $18 billion.

“Zimbabwe is currently in debt distress due to the accumulation of external debt-payment arrears amounting to $6.7 billion,” said Ncube. “The external debt overhang is weighing heavily on the country’s development needs due to lack of access to international financial resources to finance Zimbabwe’s economic recovery.”

The country has been locked out of international capital markets since 1999 after it defaulted on its debt. The list of external creditors includes the Paris Club, World Bank, European Investment Bank and the AfDB. The nation’s five biggest Paris Club creditors are Germany, France, UK, Japan and the US, which are jointly owed $3.1 billion, Ncube said. Earlier this year, the US exited from talks that began in 2022. Relations between Washington and Harare that have been strained for years remain frosty after the US kept sanctions on Zimbabwean President Emmerson Mnangagwa in March.

Meanwhile, the government intends to continue making quarterly token payments to international financial institutions as a show of commitment, according to Ncube. Since the symbolic remittances began in 2021, Zimbabwe has cumulatively paid the World Bank $70 million, the AfDB $37.4 million and the EIB $5.6 million. “Government is also making quarterly token payments of $100,000 to each of the 16 Paris Club bilateral creditors,” said Ncube. “Cumulative token payments made to date are $12.7 million.”

Bloomberg

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