Zimbabwe’s failure to service its external debts has seen arrears surging to about 77% of the total external debt.
This development means Zimbabwe is less attractive when it applies for debts from the various lending institutions.
Despite this debt overhang, Zimbabwe is trying to open avenues for borrowing to help uplift the economy that battered by deindustrialisation and bad policies.
Speaking in the National Assembly, Finance Minister Mthuli Ncube said arrears remain a challenge in the country’s quest for funding.
“Arrears remains a major challenge to the economy, making up over 77% of total external debt.
“On average, almost all external debt to multilateral development financing institutions (MDBS) is now in arrears (World Bank Group 88%, African Development Bank 95% and European Investment Bank 95%),” he said.
According to the The Finance Minister, there is need to engage the creditors with a view to settle the arrears.
“Therefore, re-engagement with MDBs and other creditors for arrears clearance remains critical in unlocking new external financing.
“Going forward, government’s strategy is as follows, prioritise token payment to MDBs and payment to creditors with positive net inflows, focus on concessional external financing, limit non-concessional borrowing to economically viable projects,” he said.
He added that there is need to “continue re-engaging MDBs and other creditors for a program preferably post staff monitored program (SMP)stage, given progress made so far in stabilising and other supply-side governance and structural reforms under the Transitional Stabilisation Program.”