World Economy

Zimbabwe Unable to Repay IFI Loans

Zimbabwe Unable to Repay IFI Loans Zimbabwe Unable to Repay IFI Loans

Zimbabwe’s economic difficulties have deepened after it defaulted on its commitment to repay its three preferred creditors—the International Monetary Fund, World Bank and the African Development Bank—$1.8 billion by June 30.

The country has an internal and external debt of $10.8 billion. The public debt amounts to $5.6 billion, split between multilateral financial institutions ($2.2 billion), the Paris Club ($2.7 billion) and $700 million to the non-Paris Club, the AfricaReport said.

Last year, the southern African nation presented an ambitious external debt clearance strategy pledging to reduce external debt arrears to international financial institutions.

Under this repayment plan, which drew suspicion and admiration, the three IFIs—World Bank, International Monetary Fund and ADB—would have been repaid simultaneously, as they are considered creditors that should be treated equally. However, Zimbabwe failed to meet its own June 30 deadline.

“Right now, we’ve not paid anything,” Reserve Bank of Zimbabwe governor, John Mangudya, told local media. “That is why we have this reengagement process with international financial institutions. This is all part of reengagement and confidence building measures.”

  Revenues Tumble

To further highlight Zimbabwe’s plight, tax authorities say the economy shrunk in the first half of the year, with revenue collections tumbling 6%.

Gross revenue collections for the second quarter grew to $866.96 million from the $781.99 million collected in the first quarter.

“The gross collections were 3% below the target of $892.88 million. This compares favorably with the first quarter revenue performance, where gross collections were 9% below target.”

Economist John Robertson told local media that the low revenue collection is likely to get worse. “After the banning of imports, they will fail to collect more revenue from imports. This will also reduce VAT if stock of goods decreases and there won’t be more profit taxes,” he said.

Cheap financing from multilateral financial institutions has eluded Zimbabwe over the years, after the country gained notoriety as a bad debtor.

  Delay in Soldiers’ Salaries

Zimbabwe has delayed paying its soldiers for a second successive month, sources said, underlining the worsening economic crisis that has triggered protests in the country.

The military is normally the first priority for payment due to their role in protecting the regime of the 92-year-old President Robert Mugabe, TimesLive reported.

But Zimbabwe’s soldiers were not paid as scheduled last week, and last month’s wages were paid about two weeks late.

The cash-strapped government, which spends more than 80% of its revenue on wages, has resorted to staggering pay dates as it scrapes the bottom of its coffers.

The average soldier’s pay in Zimbabwe is about $500 (about R7,130) a month.