PRESIDENT Emmerson Mnangagwa’s comments during his inauguration last week rekindled hope for the resuscitation of the Lima deal whose implementation stalled after Zimbabwe failed to deliver on key treaty demands.
Mnangagwa, who replaced Zimbabwe’s long-time ruler Robert Mugabe, has emphasised the need for the country to deal with its serious debt problem, which has proscribed Zimbabwe from accessing offshore funding for its capital-starved economy.
Last month, the International Monetary Fund (IMF) Africa director, Abebe Selassie, pinned his hope on the country’s 2018 National Budget as Zimbabwe remains in default on its international debts to the IMF, the World Bank (WB) and African Development Bank (AfDB).
Arrears to the three multilateral financial institutions amount to US$1,861 billion.
Two years ago, at the IMF and WB spring meetings held in Lima, Peru, Zimbabwe undertook to clear the arrears by April last year, but it failed.
But, after a promising start in which Zimbabwe paid US$110 million owed to IMF, the deal was thrown into jeopardy.
Acting Finance and Economic Development Minister Patrick Chinamasa, in July this year told The Financial Gazette in Victoria Falls that Treasury had secured funds to clear the arrears amounting to US$1,7 billion to the WB and AfDB, but surprisingly, the Treasury chief who was vigorously pursuing the deal at the time, said he would delay payment until he had undertaken economic reforms first to avoid defaulting again.
Last week Mnangagwa said the damaging consequences of Zimbabwe’s failure to service its debts had become increasingly apparent, making economic recovery difficult.
He said he will ensure that the debts are serviced for the country to enter into new relationships.
“To reduce the high country risk perception among existing and prospective investors, government will henceforth ensure that its domestic and external debt obligations are serviced to the satisfaction of its lenders and creditors,” Mnangagwa said during his inauguration as Zimbabwe’s second executive President held at the National Sports Stadium last Friday.
“We will take measures to ensure that we acknowledge and begin to show commitment towards settling our debts. Of course, our resources remain sparse, especially at this stage when we face a myriad of (fiscal) pressures, but we count on the goodwill of those we owe to give us a chance. We remain committed to honouring the debts and to enter into new relationships.”
Zimbabwe’s overall debt is estimated at US$13 billion, representing about 70 percent of its gross domestic product, resulting in the country becoming one of the sub-Saharan African countries with the highest borrowing levels.
Confederation of Zimbabwe Industries economist, Kupakwashe Midzi, told The Financial Gazette this week that indications are that the Lima deal would most likely be back on track.
“He (Mnangagwa) was one of the people who were pushing for the programme. He was very much in support for that when he was vice president of Zimbabwe and from his speech last Friday, he appeared to be pointing to that,” said Midzi.
Another economist, Caleb Fundanga, who is the executive director of Macroeconomic and Financial Management Institute of Eastern and Southern Africa, agreed with Midzi.
Fundanga, a former governor of the Reserve Bank of Zambia and permanent secretary in the Zambia Ministry of Finance said: “His message sent the right code. I think that commitment is in the right direction for Zimbabwe and the way to go.
“But, my advice is that settling the debt is not enough, but managing the debt is also important for the country.”