World Bank spells out loan conditions for Zim

By Golden Sibanda

 February 8 2009- ZIMBABWE would have to clear a mammoth US$1,2 billion debt to the World Bank to qualify for direct financial assistance from the international lending institution.

The country’s obligation to the World Bank alone equals the 2010 Budget projected revenue target and the country has no capacity to retire the debt.

Of the US$1,2 billion owed to the World Bank alone, about US$750 million is already in arrears and this is standing in the way of significant direct financial assistance the country could get from the Bretton Woods institution.

However, World Bank president Mr Robert Zoellick last week said the international lender would work with the donor community to help the country find the most appropriate way to clear its malignant debt burden.

The country is currently buckling under a US$5,7 billion debt it does not have a clue on how best to retire without causing too much pain for the country and its people.

Among the multi-lateral financial lending institutions owed by Zimbabwe are the International Monetary Fund, the World Bank, the African Import and Export Bank and the African Development Bank.

"Zimbabwe’s debt to the World Bank is more than $1,2 billion, of which about $750 million is in arrears," said the World Bank country office last week.

The World Bank has over the years maintained minimal financial aid in the form of grants for basic health services and funding for humanitarian programmes.

Mr Zoellick said the World Bank would assist Zimbabwe in retiring its debt over the same way the bank assisted Cote d’Ivoire and other countries. He pointed out that this would however depend on the donors’ sentiment on the progress the country would be making in addressing economic challenges.

The World Bank would render that kind of assistance "assuming that the inclusive Government stays on the right path and creates an opportunity for true unity and overcomes some of the problems of its past", Mr Zoellick said. "So we’re trying to position ourselves to work closely with the African Development Bank to be able to support that process (debt clearance)". Despite halting direct and significant financial assistance to Zimbabwe the Bretton Woods institution has pledged to provide technical assistance to support the economic recovery efforts adopted by the Inclusive Government.

Last year the inclusive Government adopted the Short Term Emergence Recovery Programme, then STERP II in December last year and is in the process of crafting a five year medium term plan due for completion this quarter.

Zimbabwe is at the cross roads on how best it could deal with the US$5,7 billion debt, which Finance Minister Tendai Biti had suggested could be cleared if the country earned the Highly Indebted Poor Country status. However, other stakeholders such as the Reserve Bank of Zimbabwe Governor Dr Gideon Gono fear taking this route in that it would be perilous and want the country to use its abundant natural resources to gradually retire the debt.

The World Bank is helping manage multi-donor trust fund committees on economic analysis and private sector development, agrarian sector for food security, social protection programmes, infrastructure for Harare water and tariff study as well as drafting of basic service observatory (human resources).

The country has made huge strides in addressing its macro-economic challenges and this began with the adoption of the multi-currency system and amply supported by the Short Term Emergency Recovery Programme. Since then, the country’s once rapid inflation growth was reduced to sub-zero levels, production and product availability improved and the economy started to register notable growth while thousands returned to formal employment.- The Herald