‘Lenders re-engagement will take time’

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FITCH group research arm, BMI, says Zimbabwe’s re-engagement with concessional lenders is likely to take time, a development which it says will force government to remain reliant on domestic banks to finance its budget shortfalls.
Zimbabwe, under former president Robert Mugabe, fell out with international lenders over debt arrears and with western governments which accused his government of human rights abuses.
The country’s debt and arrears clearance plan, which was first adopted in Lima, Peru, in 2015, has been stalled by various factors.
“While we are cautiously optimistic that Mnangagwa’s government will make progress towards re-engaging with foreign donors and lenders, we believe that this process will be slow… As such, the authorities will continue to rely on borrowing from domestic banks to finance a significant portion of the budget deficit, weighing on liquidity in the banking sector and economic growth at large,” BMI said in the September 2018 edition of its Africa Monitor report.
Zimbabwe has cleared its outstanding arrears with the IMF, but it is still behind schedule with its debts with the World Bank and the African Development Bank.
In January, the European Union (EU) signalled its support for Zimbabwe’s dialogue with multilateral lenders, through a resolution in which it said it was ready to help the government in political and economic reforms — including re-engagement with concessional lenders.
Philippe Van Damne, out-going EU ambassador to Zimbabwe, told The Financial Gazette that the government’s only engagement with the EU pursuant to the resolution in January has been the invitation to observe the just ended elections. He said there was room for more engagement between the two parties on economic and political matters.
“The council’s conclusion in January basically stated that we are ready to engage to accompany this government on political and economic environment, the first conclusion of that engagement has been the invitation for a long term election observation mission.
“More engagement is required and more dialogue required to clarify the intentions of government, not only in terms of economic reform but also in terms of political reforms, because on the political field it is clear that there are still some unresolved issues.
“As I have already mentioned, the issue of constitutional alignment…We have issues to do with the electoral process as well. EU electoral observation mission will probably come up with a series of recommendations on what can be improved so we would engage with the government on how they plan to respond to these recommendations. To the issues around human rights, we would expect the government to engage on how they will deal with these human rights violation and maybe follow on that universal periodic review which was discussed in Geneva last year,” Van Damne said. newsdesk@fingaz.co.zw