Zim to start clearing foreign debt

Harare (New Ziana) – Zimbabwe is targeting to start servicing its external debts to the Paris Club group of creditors in the second half of the year, Finance and Economic Development Minister Professor Mthuli Ncube said on Thursday.

The country, saddled by sanctions imposed by Western nations for nearly 20 years, had defaulted on the loans, leading to its exclusion from further borrowing in international capital markets.

Ncube said as at end December 2020, the country’s external debt arrears alone amounted to over US$6.5 billion of total external debt which, including the central bank guaranteed external loans, amounted to US$10.5 billion, representing 71.2 percent of the country’s Gross Domestic Product (GDP).

“Mr Speaker Sir, Treasury, in March 2021, resumed quarterly token payments to the Multilateral Development Banks, the World Bank Group, the African Development Bank Group and the European Investment Bank.

“Token payments are part of the re-engagement process with the international community in line with the Arrears Clearance & Debt Relief Strategy which is critical in regaining access to concessional financing from both multilateral and bilateral development partners. Payments to Paris Club Creditors will also begin in the second half of 2021,” he said.

“We want Zimbabwe to be known as a good debtor, not a bad debtor. So all creditors will be paid including the 17 Paris Club members beginning second half (of the year). We have written to all of them and they are accepting one by one and they are sending us their bank details, we will start paying, we want to be a good debtor.”

Because foreign funding options were limited, Ncube said government was relying heavily on domestic borrowings.

Consequently, he said, domestic debt as at end April 2021 amounted to ZWL$20.9 billion.

Meanwhile, Ncube said the Central Bank and Treasury were finalizing a Blocked Funds Bill for the settlement, by government, of around US$2.8 billion foreign exchange liabilities contracted by Zimbabwean entities prior to the change of currency in February 2019.

“Resolution of blocked funds is being done along the lines of the 2015 RBZ Debt Assumption Act and in pursuant of Statutory Instrument 33 of 2019 that separated historical foreign currency obligations (blocked funds) from historical local currency obligations. In terms of this Statutory Instrument, the blocked funds are treated as foreign exchange obligations to be paid by government to external creditors on behalf of the local contracting entities,” he said.

New Ziana