Western donors are ready to cancel Zimbabwe’s $6 billion foreign debt, Finance Minister Tendai Biti said, adding that the lenders were waiting for Harare to put the process in motion.
The southern African country last received balance of payment support in 1999 after which international financial institutions froze out Zimbabwe due to policy differences with President Robert Mugabe.
But last year’s formation of a unity government between Mugabe and long-time rival Morgan Tsvangirai, now prime minister, led to the first economic growth in a decade as the country embarked on economic reforms.
Biti said there was no going back on the reforms but that the coalition government was divided on his proposal to have Zimbabwe declared a heavily indebted country to qualify for debt forgiveness, thereby allowing it to qualify for new aid.
Arrears to the International Monetary Fund, World Bank and African Development Bank (AfDB) total $1.3 billion, which must be cleared before Harare can get any help.
“I am in constant touch with the donors and I have no doubt that they will cancel the debt and put in new money,” Biti told reporters yesterday after meeting senior AfDB executives.
“But they have said they will only help us once there is a green light from the government,” Biti, a member of Tsvangirai’s Movement for Democratic Change, said.
That may take a while to come, with Mugabe’s ZANU-PF party firmly opposed to declaring Zimbabwe heavily indebted and poor, arguing that the former British colony has sufficient resources to rebuild the economy.
In a country where 85% of people live below the poverty line, annual per capita income is less than $400 and hospitals and schools are underfunded, Biti said he would need “to have my head examined” if he paid the debt.
He is working with the AfDB to craft a debt cancellation plan but the finance minister said this would need to be backed by a good political and economic track record.
Hassan Khedr, an AfDB executive director, said the bank stood ready to help.
“That is do-able only if the country is willing to have an arrears clearance process that will definitely help the country get access to resources that will be provided through the AfDB,” he told reporters.
“Time is of the essence and the sooner the better for your economic recovery.”
Pic: Zimbabwe Finance Minister- Tendai Biti