AS Zimbabwe attempts to lift itself out of a punishing debt crisis, it is asking for “deep haircuts” from its creditors, including China, according to its finance minister, Professor Mthuli Ncube.
But analysts say China is “not in the business of haircuts” and is unlikely to accept any reduction of the debt it is owed.
Ncube is seeking help from creditors to address the US$19.2 billion that the country owes, of which US$13 billion is external debt and US$6.2 billion is domestic. Most of the debt was accrued during the era of late former president Robert Mugabe – and most has remained unpaid for decades.
“Zimbabwe is currently in debt distress due to the accumulation of external debt payment arrears amounting to US$6.7 billion,” Ncube said.
“The external debt overhang is weighing heavily on the country’s development needs due to lack of access to international financial resources to finance Zimbabwe’s economic recovery and priority projects.”
“We are looking for a lot of haircuts … very deep haircuts and elimination of all penalties.”
According to Zimbabwe’s debt registry, bilateral external debt stands at US$6.2 billion but US$4.7 billion of the amount is in arrears – about 76 per cent of the total bilateral debt.
Harare owes US$4.1 billion to Paris Club creditors – an informal grouping of mainly Western creditor nations focused on sustainable debt-relief solutions.
However most of that debt – about 98 per cent or US$4 billion – has been in default since Zimbabwe fell into financial hardship two decades ago.
At that time, the nation was shut out of international financial markets, including the International Monetary Fund (IMF) and the World Bank, following sanctions imposed on Mugabe’s government by the US and other Western countries, largely in response to land seizures forced on white farmers – the fallout of which is still being felt today.
Zimbabwe’s biggest five Paris Club creditors are Germany, France, Britain, Japan and the US, accounting for US$3.1 billion or 75 per cent of the Paris Club debt.
The country also owes non-Paris Club creditors, such as China, US$2.1 billion, of which about a third is in arrears. — SouthChinaMorningPost
