The creditors and how much they owe

President Emmerson Mnangagwa and Minister of Finance and Economic Development Mthuli Ncube recently attended a round table meeting on Zimbabwe’s debt settlement in Sharm el-Sheikh, Egypt.

The round table meeting took place on Wednesday evening and was a side event during the annual general meetings of the African Development Bank.

Zimbabwe is embroiled in an external debt crisis which has made it difficult for the country to obtain loans from international financial institutions such as the International Monetary Fund (IMF) due to arrears.

What is foreign debt?

as one Online resourceExternal debt or external debt is the part of a country’s debt that is borrowed from foreign creditors, including commercial banks, governments or international financial institutions.

These loans, including interest, must usually be repaid in the currency in which the loan is issued.

If a country is unable to pay its foreign debt, it is said to be in sovereign debt, a credit crisis.

Zimbabwe’s debt inherited from Rhodesia

Debt justice Zimbabwe says it inherited a huge debt from Rhodesia that ran up in the 1980s, the country’s first decade after independence.

In the year In 1980, Zimbabwe inherited a $700 million debt from the Ian Smith government of Rhodesia.

The loan was used to buy weapons in violation of United Nations (UN) sanctions in the 1970s.

The new government is reportedly under international pressure to pay off its debt, with Western governments promising more than $2 billion for reconstruction and development. It is said that most of the aid money was never received.

Zimbabwe received loans from the UK and Spain to buy Land Rovers and military aircraft, as well as from the World Bank to plant trees.

In the year In 1990, Zimbabwe had to take a bailout from the IMF and the World Bank to pay off its debt.

Zimbabwe in 2010 In 2000, he defaulted and his creditors stopped lending to the country.

What is default?

Default is the failure to make the required interest or principal payments on a debt, whether it is a loan or a security.

A sovereign default occurs when a country defaults on its debt. Although a country cannot be forced to meet its obligations in court, countries that have defaulted on sovereign debt may find it difficult to borrow again and may pay high interest if they get the chance.

according to InvestopediaCommon causes of sovereign failures include economic failure, political instability, and financial mismanagement.

How Much Debt Does Zimbabwe Have?

In the year In October 2022, the Ministry of Finance’s Public Credit Management Office issued a medium-term credit management strategy with the latest information on the extent of the country’s debt crisis.

It said total public and publicly guaranteed (PPG) debt in December 2021 was $17.2 billion.

This is foreign debt of 13.4 billion dollars (77.9%) and domestic debt of 3.8 billion dollars (22.1%).

The total public debt includes $3.533 billion in frozen funds and a $3.5 billion obligation to former white farmers for land improvements in new settlements.

In addition to the principal debt, Zimbabwe has arrears and penalties for not paying its debts on time.

What are liabilities?

If a country is said to be in arrears, it has failed to make regular contractual payments. The term arrears applies to overdue payments.

In the year As of December 2021, Zimbabwe has accumulated foreign debt arrears and penalties of $6.6 billion. This includes penalties of US$2.01 billion in December 2021.

Of the total external debt arrears, $4.2 billion (63%) is owed to bilateral creditors, while $2.4 billion (37%) is owed to the World Bank and other multilateral creditors.

Who owns Zimbabwe?

In the year As of December 2021, Zimbabwe owes $5.6 billion to bilateral creditors – as individual countries – and $2.7 billion to several multilateral creditors – international financial institutions.

Foreign debt

  • He owes $3.9 billion to the Paris club. This is a group of 22 permanent member countries that include Australia, Austria, the UK, Japan and the US.
  • $1.8 billion is owed to non-Paris Club bilateral creditors.
  • He owes $1.5 billion to the World Bank.
    It owes $711 million to the African Development Bank.
  • It owes $358 million to the European Investment Bank.

Over the years, the government has taken over the debts of the Reserve Bank of Zimbabwe (RBZ).

Zimbabwe in 2010 According to the 2015 RBZ Debt Contingency Act, it owes US$111 million to creditors, US$4.9 billion in RBZ balance sheet foreign debt.

Zimbabwe’s Chinese loans

In the year Nkube told Parliament in 2022 that Zimbabwe has borrowed $2.7 billion from China since 1980.

In the year By August 2022, China’s outstanding debt had reached $1.768 billion, he said.

Most of the Chinese loans are for infrastructure projects, but Zimbabwe has been struggling to provide some of the Chinese loans.

According to the Debt Management Office, China is not disbursing as much credit as required because Zimbabwe is in arrears.

Treasury says Zimbabwe owes arrears on loans for Victoria Falls Airport (US$65.36 million), NetOne Network Expansion Phase I & II (US$66.65 million) and the TelOne National Broadband Expansion Project (US$8.0 million).

Zimbabwe arrears clearance and debt processing

In the year In 2022, President Emmerson Mnangagwa appointed African Development Bank President Akinwumi Adesina as Zimbabwe’s head of arrears and debt processing.

In the year Speaking at the inaugural Zimbabwe Debt Clearing and Debt Forum 2022 at the Rainbow Towers Hotel in Harare, Ncube said Adesina has pledged to work with other institutions to resolve Zimbabwe’s arrears and international debt. Creditors.

Former Mozambican President Joachim Chisano has been appointed as a liaison between the Zimbabwean government as the debtor, bilateral credit partners and other stakeholders.

Chisano is being supported by a technical adviser to former Mozambican Prime Minister Luisa Diogo.

By October 2022, the country had begun making token payments to the IMF, World Bank and other creditors. he said:

We have started making token payments to the World Bank, the African Development Bank, the European Investment Bank.

And all the Paris Club lenders, 17 of them, make token payments to show that we want to be good borrowers.

Ncube also said IMF staff will visit Zimbabwe in December and then discuss the staff-monitored program in the first and second quarters of 2023.

He said that this will allow us to get a source from a sponsor who will help us with bridge financing to overcome the arrears of international lenders.

Debt restructuring

Ncube said the “sponsor” will help Zimbabwe restructure its debt to bilateral Paris Club creditors.

Debt restructuring is a process whereby lenders agree to lower the interest rate on the loan, extend the repayment date, or both.

Zimbabwe’s debt crisis and reforms

In May 2023, Mnangagwa told development partners and creditors that Zimbabwe was committed to implementing critical reforms to address the country’s debt and arrears.

The Prime Minister was speaking at the Adesina Chisano Debt Resolution Forum in Harare.

Herald Most of Zimbabwe’s $8.3 billion in bilateral and multilateral debt is covered by arrears.

However, in May 2023, Marketing economics By 2023, Zimbabwe’s external debt is projected to hover at US$18.6 billion.

South African Finance Minister Enoch Godongwana said his country would support Zimbabwe implementing key reforms to address its debt problems.

Gondongwana delivered a message of support at a round table meeting on Zimbabwe’s debt arrears agreement at the African Development Bank’s 2023 annual meeting.

Any challenges faced by Zimbabwe will also affect South Africa’s economy, he said.

Zimbabwe is a major market for South African products. South Africa has also hosted millions of Zimbabwean economic migrants.

Adesina said Zimbabwe’s debt arrears and debt resolution include management, rule of law, human rights, freedom of expression and electoral reform, among others. he said:

The issues are not just economic or financial. They also ensure governance, rule of law, human rights, freedom of speech, political platform, electoral reforms that ensure free and fair elections – as well as fairness, equity and justice for commercial farmers and other dispossessed businesses. Their land, for which there is a clear need for restoration and compensation.

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