Zimbabwe to get first World Bank grant since 2001

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The World Bank says it will soon make its first grant to Zimbabwe since 2001, a breakthrough for the power-sharing government which is desperate for Western financial aid to fix the bankrupt economy.

Finance Minister Tendai Biti told reporters yesterday the unity government of President Robert Mugabe and Prime Minister Morgan Tsvangirai had made huge progress in securing funding from foreign donors.

A World Bank official, Toga Gayewea McIntosh, said earlier a $22 million grant would be available in the next few weeks but that major support would only come when Zimbabwe clears its arrears. That is not expected any time soon, Reuters notes.

McIntosh was speaking after meeting Prime Minister Morgan Tsvangirai and Biti.

Zimbabwe will depend heavily on international support for reconstruction. Strong ties with the World Bank and International Monetary Fund are vital.

“There are conditions to re-engagement with the Bank, you have to do a lot of things, such as the clearance of arrears,” said McIntosh, the bank’s executive director for a group of countries that includes Zimbabwe.

Zimbabwe owes about $1.1 billion to the World Bank and the African Development Bank. Total arrears to official and private creditors amount to about $3.8 billion.

The government has appealed for $8.3 billion to help rebuild an economy ravaged by hyperinflation and business contraction, but Western donors have been wary of committing funds until it is clear the government is working effectively.

“We are making great strides towards budgetary support assistance. We are talking of big figures, but I can’t disclose,” Biti told reporters after a meeting with an International Monetary Fund (IMF) delegation.

The IMF team of experts yesterday began a visit to provide technical assistance in the areas of payment systems, bank supervision and central bank governance.

“Our mobilisation has been much sharper in the past two weeks but the Prime Minister will be making an announcement to that effect in due course.”

Biti however said the country’s banking sector was in distress and suggested that one or two would not survive a “stress test”.

Sharp differences remain between Mugabe and Tsvangirai, from the long time opposition Movement for Democratic Change (MDC), over difficult issues such as the review of the posts of central bank governor and attorney general.

Despite its limited success with Western donors, who demand wider political and media reforms and the release of all political prisoners, Zimbabwe has raised $30 million from South Africa and $5 million from China.

The government also says it has surpassed a $1 billion target in credit lines for the private sector from African banks.

Biti said the government would work with the World Bank on a debt reduction programme.

“Without an arrears clearance programme, we cannot avail ourselves of the huge funds that are available,” Biti said.

Zimbabwe has been in continuous arrears to the IMF since February 2001, and now owes the organisation about $133 million.



The IMF, which suspended Zimbabwe‘s voting rights in 2003, has previously indicated that all arrears needed to be cleared before any resumption of financial support.