Mthuli Ncube. Picture: THE TIMES
Mthuli Ncube. Picture: THE TIMES

Harare — The World Bank and IMF have endorsed Zimbabwe’s plan to clear more than $2bn in foreign debt, the finance minister announced on Wednesday, adding that the lenders had also backed his two-year economic recovery programme.

President Emmerson Mnangagwa has promised to revive the struggling economy, pay foreign debts that the country has defaulted on since 1999 and end Zimbabwe’s international pariah status gained under former president Robert Mugabe’s near four-decade rule.

Finance minister Mthuli Ncube, who is attending the IMF and World Bank meetings in Bali, Indonesia, said in a statement his plans to clear the arrears to the World Bank, African Development Bank and European Investment Bank had been accepted.

"All the co-operating partners and creditors present uniformly expressed their support for Zimbabwe and its arrears clearance road map," Ncube said. He did not give details and none of the creditors had immediate comment.

The lenders and Western donors urged Ncube to "judiciously" implement his two-year economic recovery programme announced last Friday, the statement said.

Ncube’s plan will result in cuts to government spending and the state wage bill, and privatisation of loss-making state-owned firms.

Zimbabwe, which adopted the US dollar after hyperinflation left its own currency worthless in 2009, is gripped by acute shortages of cash dollars. Prices of basic goods and medicine have risen in the last few days.

At the heart of its economic problems is a $17bn domestic and foreign debt, a $1.8bn trade deficit that has worsened dollar shortages and lack of confidence in the ruling party by citizens still traumatised by hyperinflation.

Prices of basic goods, medicine and drugs, building materials and public taxis have risen by at least 50% in the last week.

The economic crunch is increasing political tension after a July vote that was supposed to lay the foundation for Zimbabwe’s recovery was instead followed by turmoil that left six people dead after an army crackdown.

The latest crisis was triggered by fiscal and monetary changes announced on October 1, including a 2% tax on money transfers and separation of cash dollars and foreign inflows from bond notes and electronic dollars, that caused the collapse of the surrogate currency on the black market.

When the changes were announced, $100 in bond notes was worth $49 cash dollars but only $26 on Wednesday.

In a separate statement, Ncube said the bond note and electronic dollars would remain officially pegged at 1:1 to the US dollar as the government seeks to protect people’s savings.

He said the government would also gazette rules protecting foreign dollar inflows to ensure the money was not
taken by the central bank or government, good news for mines outraged by the US
dollar shortages.

On Wednesday, some shops and restaurants, including the local franchise of fast-food chain KFC, had closed their outlets because some suppliers of goods and medicine were demanding that they be paid cash dollars.