The International Monetary Fund has ruled out resuming loans to Zimbabwe until the southern African country has retired its longstanding external debt of about $10 billion. Zimbabwe's government is seeking new loans to help bail out its depressed economy.
After concluding a two-week review, Domenico Fanizza, who headed the IMF delegation, said Zimbabwe is making progress toward re-engaging the international community.
He added, however, that Zimbabwe remains “in debt distress,” and said it has four major steps to take. These include restoring confidence in its financial institutions, improving its investment climate and balancing its budget -- with the last being a major problem in a country where salaries for government workers consume about 92 percent of revenue.
"Fourth, last but not least; gathering support for a strategy to clear arrears with multilateral institutions. Efforts should be deployed in order to garner consensus on this strategy," said Fanizza.
Fanizza added that clearing these debts - which have been accumulating since 2000 -- would clear the way for Zimbabwe to receive new funding from international organizations such as the IMF, the African Development Bank and the World Bank.
Last year, the IMF said Zimbabwe did not qualify for debt relief under its Heavily Indebted Poor Countries (HIPC) initiative, which has helped to settle the debts of countries like Zambia. The IMF said Zimbabwe had the resources to clear its debts.
Zimbabwe's finance minister, Patrick Chinamasa, appealed to visiting African Development Bank executives to write off $500 million the bank is owed by Zimbabwe, hoping other organizations such as the IMF and World Bank will do the same.
On Monday, Chinamasa said Zimbabwe would abide by the IMF’s recommendations.
“Our intention is that by this time next year, we should be entering the new phase of clearing our arrears and opening floodgates of development financing, FDI and other financial flows that will stimulate economic growth and reduce poverty in our country. Until we clear our arrears, we are not in a situation that we are able to engage creditors for fresh money," said Chinamasa.
Financial institutions have denied fresh funding to Zimbabwe for about 15 years, since the government of longtime President Robert Mugabe started defaulting on its loans.
The denial is also linked to Mugabe's human rights record and economic policies, especially the laws that require black Zimbabweans to have a majority of any branch of a foreign-owned company operating in the country.