Zimbabwe has secured $1,2 billion needed to clear World Bank arrears with Finance and Economic Development Minister Patrick Chinamasa saying the transaction will be completed once the Washington-headquartered financial institution announces the amount it will give the country as fresh funding.
The World Bank and the African Development Bank (AfDB), Minister Chinamasa said, have since January been carrying out an exercise to determine Zimbabwe’s needs across sectors with a view of providing fresh funding.
Zimbabwe owes AfDB around $600 million.
Although Minister Chinamasa did not disclose the source of the loan, indications are that Afrexim Bank is assisting Zimbabwe.
“As you are aware, we cleared our arrears with the International Monetary Fund (IMF) and the rule is, we must address our indebtedness first to other multilateral institutions,” he said during an interview with The Africa Report in Cote d’lvoire this week.
“All I can say is that we have succeeded to mobilise a commercial loan which is cheaper than what the World Bank is now charging us and that when we know what new money the World Bank will give us, then we should be able to complete the transaction. We cannot pay $1,2 billion without the expectation of new money. It does not make sense for us and they also recognise it does not make sense. I am happy to observe that they are coming our way in terms of that understanding.”
Despite settling a debt of $108 million to IMF, fresh funding has eluded Zimbabwe as the international lending institutions operate using the pari-passu rule.
The rule states that all creditors are equal and should be paid back at the same pace or to the same degree without bias or preference.
Minister Chinamasa said despite the regulation, they were finding common ground with the World Bank.
“In our conversation with the World Bank, we have been saying the arrears come to $1,2 billion and it is a large amount of money to pay from a struggling economy. They should indicate to us what they will pay us by way of new money into the economy. We have expectations that when we clear the arrears we should get new money.”
He added: “That has been the conversation and I am happy to say that since January the World Bank and the AfDB are undertaking an exercise to determine our needs, across all sectors. That exercise when completed will inform the World Bank and the AfDB as to what new money they can consider pumping into our economy to resuscitate it.”
Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya weighed in: “The purpose of paying arrears is to unlock new capital. Our motivation for wanting to pay arrears is to unlock capital from these two institutions and we need to know what they are giving us as fresh funding.”