By Bernard Mpofu
Zimbabwe’s failure to settle debt arrears with international financial institutions is affecting its ability to access more from a multi-billion facility organised by multilateral creditors to help developing countries to deal with the socio-economic impact of the Covid-19.
Covid-19 pandemic has led to an unprecedented economic crisis worldwide, with disastrous social consequences, including a sharp rise in unemployment and desperate people requiring state assistance for food, health services and housing.
After 25 years of continuous growth, Africa is severely hit and suffered a recession in 2020.
In an economic update that included commentary on assistance required by the developing nations to help manage the impact of Covid-19, the World Bank said Zimbabwe’s access to more resources was being affected by its standing on old debts.
Zimbabwe defaulted on arrears payments at the turn of the century resulting in it failing to access long-term funding for multilateral lenders such as the World Bank and International Monetary Fund (IMF).
Official figures show that public and publicly guaranteed external debt stood at 83 percent of the Gross Domestic Product (GDP) in 2019, of which 61 percent of GDP was external arrears.
Although Zimbabwe’s management of central government finances had improved in 2019, the World Bank said government’s current responsibilities and its considerable debt burden and limited access to (favourable) concessional financing, continued to limit its ability to clear its foreign debt repayment arrears.
“The Government’s ability to respond to the pandemic is constrained by limited access to concessional sources of financing,” the World Bank said in its update.
“External debt arrears that reached 78 percent of external public debt in 2020 have prevented Zimbabwe from benefitting from finance from International Financial Institutions (IFIs) and global initiatives, such as the global Debt Service Suspension Initiative (DSSI).
The DSSI is intended to suspend debt payments from the poorest countries to official bilateral creditors based on countries’ requests for forbearance, with a view to providing immediate liquidity to tackle challenges posed by COVID-19,” the World Bank said.
Zimbabwe not eligible
Although international financial institutions had also put in place programmes to assist in the COVID-19 response, including procurement of PPEs and vaccinations, Zimbabwe remained ineligible for this support due to the debt arrears, it added.
The Zimbabwe government, the World Bank said, had opted therefore opted for collateralised external borrowing on commercial terms, which could complicate future arrears clearance operations.
Given Zimbabwe’s inability to access more international finance, its spending on those affected by Covid-19 was considerably lower than in other developing countries, according to the bank.
This was having a serious impact on both households and the private small and medium enterprises, increasing hardship and poverty levels in the country, it said.
Zimbabwe is now battling a third wave of new infections and authorities have imposed localised lockdowns and tightened restrictions in different parts of the country.
Experts blame the relaxation of previous restrictions and public complacency across the country for the rising cases of Covid-19 fatalities and infections.