African Development Bank (AfDB), Akinwumi Adesina heads to Zimbabwe in May to hold critical discussions with government over the country’s debt crisis. Part of Adesina’s visit will include creating a pathway to debt arrears clearance where the bank is offering technical support. His deputy, Yacine Fal was in the country a fortnight ago for key meetings with fiscal authorities in preparation for the main visit. Zimbabwe owes $716 million to the AfDB and other multilateral lenders. According to treasury Zimbabwe’s debt stands at $13.2 billion. The NewsReport (NR) spoke to AfDB country manager, Moono Mupotola (MM), to discuss the debt crisis, roadmap to payment of arrears and key funding mechanisms for the private sector and below are the excerpts:
NR: Over the past few days, you have held meetings with Zimbabwean finance authorities. Could you let us into the discussions and the major talking heads?
MM: Our meetings were centred around two key areas. The first is the work that the AfDB is doing in Zimbabwe, specifically providing support to the Zimbabwean government. As you know, we have a portfolio of about US$177 million, spread across 15 projects, 14 are public and one of those is in the private sector. Really, the team has been reaffirming the commitment of the bank to working with the government of Zimbabwe to provide support, given the situation that Zimbabwe cannot borrow from the bank, so most of the support has been in grants. This is important in light of the ongoing discussions of the African Development Fund, which is our concessional window, which countries like Zimbabwe benefit from. The second area is to announce the visit to Zimbabwe by the President of the AfDB, Dr Akinwumi Adesina, early May. He has agreed, at the request of the Zimbabwean government, to champion the arrears clearance for Zimbabwe.
So, the high-level delegation was here to pave the way, to really look at what are the issues, talk to different stakeholders, not just to government, but also the private sector and also development partners, and put together a programme that will inform the President’s visit next month.
That’s what this part of the meeting was really for. It was for the Zimbabwean government to really define how they see Dr Adesina’s role. Part of it is, one; to ensure that all the parties are brought to dialogue, to chair the roundtable meeting to discuss the debt situation in Zimbabwe. So, President Adesina would be the one to chair such a meeting.
But more detail will be availed when he comes, and that’s why he’s having this visit to get to understand what is expected of him from the Zimbabwe government.
NR: How much is Zimbabwe’s debt to the AfDB?
MM: Right now, the debt stands at $716 million approximately to the AfDB. The arrears have been accruing from the 2000s so it is policy that if a country does not pay its arrears, it cannot borrow. Unfortunately, Zimbabwe has been in that situation for a long time. But the bank came back to Zimbabwe in 2010 and opened its country office and has been working very closely in the areas of water and sanitation, power through the Zimbabwe Fund for Development.
Working on several other portfolios, including the Kariba rehabilitation project. Looking more recently, during Cyclone Idai we provided $14 million to the community in Manicaland. Recently we provided another $10 million grant for Covid-19, and this has been implemented throughout the pandemic.
NR: What is the debt clearance plan on the table for Zimbabwe?
MM: That should be asked from the government. But from the ADB, money is owed, and the country must figure out how it is going pay back. However, having said that what we would want to do is to support in this process. For instance, our latest support, we have a $3,5 million operation that was approved last year which will go to support government institutions and that includes the debt management office so that they can come up with solutions to dealing with the debt and satisfy some of the conditions on a technical level.
NR: You have been supporting the private sector, but the Zimbabwean economy is highly informal. Do you have plans to offer loans for the informal sector?
MM: We have a private sector window of $50 million on a yearly basis. In 2022 we also another $50 million. We are a wholesaler; we don’t go down to the informal sector. What we do is that we on lend to the private sector. In 2018 operation with CABS, we provided $25 million line of credit to CABS, and they repaid it back. It is one of our good customers, they paid on time-they might be a repeated customer. We have just last month approved a $7,5 million guarantee instrument to CABS again. Most corresponding banks are nervous about guaranteeing exports coming out of Zimbabwe. What this guarantee does is that it provides comfort as a trade finance instrument to corresponding banks that they will get their money. It also guarantees that the exporters will get their dues.
NR: Why do you think corresponding banks are reluctant to work with Zimbabwean banks?
MM: Part of the problem is Zimbabwe’s ratings. These financial institutions provide Zimbabwe’s credit ratings, and because of the current situation – sanctions are just one part of the equation – this is a country under debt distress. So, to me the debt distress situation of the country on the financial markets – I wouldn’t call it sanctions per se – means that the country has to look for other instruments to provide comfort to corresponding banks. In this case, AfDB has stepped up to support the Zimbabwean private sector.