African Development Bank Engages Zim Government

African Development Bank Engages Zim Government
African Development Bank(ADB) Vice President,Mr Aloysius Uche Ordu said that ADB has reengaged the Zimbabwean government to facilitate in the repayment of the debt that the government owes to the International Monetary Fund (IMF)and the World Bank.
He said that while addressing a press conference at the Ministry of Finance offices. The pact between ADB and the Zimbabwean government will see the bank injecting money into infrastructural development projects in the country. He hinted that the best way forward for Zimbabwe was to repay its arrears and debt.
Finance Minister Tendai Biti also concurred with Mr Ordu sentiments that the debt was a barrier to economic development.ADB will work out out on arrear payment and facilitate Zimbabwe to repay the debt.ADB will assist Zimbabwe to clear its debt so that it can access funds from the Paris Club. The Paris Club is an informal group of financial officials from 19 of the world's richest countries, which provides financial services such as debt restructuring, debt relief, and debt cancellation to indebted countries and their creditors. Debtors are often recommended by the IMF after alternative solutions have failed.
Special Drawing Rights(SDR) are a form of international money created by the International Fund which is acceptable in settlement of debt between countries.The allocation of special drawing rights (SDRs) to Zimbabwe has stirred controversy about their use to bolster flagging public finances, while the fragile coalition government struggles with a total external debt burden projected to rise to almost $7 billion by year end.Allocation of SDR’s is recommended by G20 countries.As long as Zimbabwe does not repay its debt, then the chances of it receiving funds are very slim.
In early September the IMF allocated $510 million worth of SDRs to Zimbabwe, its share under the recent $250 billion SDR increase. Despite being in arrears to the IMF, the country is still eligible for SDRs. Under the IMF's Articles of Agreement, the Fund cannot withhold these new SDRs, as it can other types of IMF lending. It would, however, be allowed to withhold the additional SDRs due to Zimbabwe as a result of the recent ratification of the 4th amendment. However, controversy flared as reports indicated that the finance minister,Tendai Biti was seeking to prevent the transfer of these interest-charging funds, preferring to maintain them as part of Zimbabwe's reserves.
The announcement by ADB will reduce government deficit.Finance Minister Tendai Biti has in the past clashed with central bank Governor,Gideon Gono over the SDR funds because he was arguing that since SDR’s are a loan ,this will increase government loan.
Of the country's total unsustainable external debt, $140 million is owed to the IMF, $673 million to the World Bank and $430 million to the African Development Bank (AfDB). Arrears and interest constitute over 50 per cent of the total external debt.
Mr Ordu said Zimbabwe’s easiest route was to declare the country a Highly Indebted Poor Country.(HIPC) The country is not part of the Highly Indebted Poor Countries (HIPC) initiative and not eligible for debt relief under the multilateral debt relief initiative (MDRI), though the government has engaged the World Bank for assistance in clearing multilateral arrears and envisages benefiting from debt relief under the HIPC and MDRI frameworks.
The repayment of the debt owed to IMF will continue to increase interest.The pact between the Zimbabwean government and ADB will speed up debt payment and and wil improve management of debt.