Country hopes to sign-off deal with multinational lenders in December

July 5, 2016 6:09 AM

Zimbabwe is trying to emerge from years of international isolation, largely blamed on President Robert Mugabe's policies, including the seizures of farms from white farmers.

Zimbabwe's Finance Minister Patrick Chinamasa (L) addresses a media conference after meeting International Monetary Fund (IMF) Executive Director for Africa Chileshe Kapwepwe (R) in Harare, September 7, 2015.

Zimbabwe hopes to get its proposal to clear debt arrears with multilateral lenders signed off by December, enabling it to start talks with bilateral sovereign lenders, Finance Minister Patrick Chinamasa said on Monday.

Zimbabwe is trying to emerge from years of international isolation, largely blamed on President Robert Mugabe's policies, including the seizures of farms from white farmers.

In early March, the government agreed to major reforms including compensation for evicted white farmers and a big reduction in public sector wages in an effort to woo back international lenders.

"We are looking forward to the three multilateral lenders to formally adopt our debt clearance strategy when they meet in December," said Chinamasa, adding he expected this to be a "done deal".

"But if we clear the arrears without a corresponding commitment of new money, we will be in a worse position ... there is need for reciprocal commitment to provide us (with) new money, and that are the negotiations that we are undertaking."

The Southern African country's foreign debt stands at $8.3 billion, of which $1.8 billion is arrears.

Zimbabwe is one of the few countries in arrears with the IMF. Countries are required to clear all arrears with multinational lenders before engaging in talks with other creditors.

Zimbabwe owes around $110 million to the International Monetary Fund, which it hopes to clear against a special drawing rights (SDRs) allocation of around $130 million, Chinamasa said at a briefing at London-based think-tank Chatham House.

The IMF has special allocations of SDRs -- backed by a basket of major currencies and commonly used as the unit of denomination for financial arrangements between the lender and its members -- which include development financing and emergency loans to countries with liquidity problems.

A bridging loan from the African Export-Import Bank would help clear arrears of $600 million to the African Development Bank, while Harare was also talking to the World Bank where it owes $900 million, said Chinamasa.

It is not immediately clear whether the lenders are working to the same timetable as Zimbabwe or will approve the proposals.

"After we have cleared the arrears to the three multilateral institutions, the next step will be to engage Paris Club creditors," Chinamasa said, referring to the Paris Club of wealthy creditor nations which tackles issues over bilateral sovereign debt.

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