Mthuli Ncube. Picture: BUSINESS DAY
Mthuli Ncube. Picture: BUSINESS DAY

Zimbabwe, locked out of coronavirus-related aid programmes because of debt arrears, has thrown itself at the mercy of organisations including the IMF. It has received no response.

In an April 2 letter to the heads of the IMF, World Bank, African Development Bank, Paris Club and European Investment Bank, Zimbabwe’s finance minister, Mthuli Ncube, sought debt relief and an arrears clearance programme, according to a copy of the letter seen by Bloomberg.

The government has not received any replies, said two people with knowledge of the matter, who asked not to be identified as the request has not been made public.

“The global Covid-19 pandemic is expected to have a devastating health, humanitarian and economic impact on Zimbabwe,” Ncube said in the letter. “Domestic resources to allow the authorities to mitigate the impact of the pandemic are insufficient and access to external financing is severely constrained due to external debt arrears.”

The outbreak and economic impact have hit Zimbabwe as it struggles to recover from the worst drought in 40 years, a cyclone and two decades of economic mismanagement that left the country short of fuel and wheat and with an annual inflation rate of 676%. Relations with multilateral organisations have been soured by Zimbabwe’s inability to keep up with payments on $8bn of external debt.

Zimbabwe, along with Sudan and Eritrea, is ineligible for recently announced aid from the IMF because of those arrears.

Economic outlook

Ncube said the economy is set to contract by between 15% and 20% over 2019 and 2020, and cited a World Bank assessment that the nation’s funding gap will be $1bn this year.

In the letter, Ncube said the government accepts “responsibility for the recent policy missteps” and laid out a series of measures the administration is prepared to take if the organisations agree to “high-level” talks.

Those steps include adopting a market-related exchange rate, ensuring that the central bank no longer lends money to the government, cracking down on corruption, aligning laws to a constitution that was adopted in 2013 but never fully implemented, and electoral reforms.

Ncube also offered to conclude an agreement by June that would lead to the compensation of white commercial farmers who were forced off their land in the past two decades in a violent and botched land-reform programme.

In return, the government is seeking the rescheduling or cancellation of bilateral debt arrears, Ncube said, adding that Zimbabwe proposes rescheduling the arrears over 15 years with a five-year grace period. It also wants a bridge loan to allow it to clear arrears to the World Bank, African Development Bank and European Investment Bank.

“It is very unfair for Zimbabwe to be locked out of support to deal with a global humanitarian crisis which it did not create,” said George Guvamatanga, permanent secretary in Zimbabwe’s finance ministry. “Especially considering that we were already on our own dealing with drought and cyclone-induced crisis.”

The Financial Times earlier reported on the letter.

Bloomberg