Is Zimbabwe’s Arrears Clearance and Debt Resolution Structured Dialogue the panacea to decades long debt crisis?

In the early 2000s, Zimbabwe went on to default on its external debt obligations as its political and economic crisis turned ugly with the Fast Track Land Reform Programme causing internal chaos, volatility and shocks to capital. Arrears and penalties began to accumulate and currently Zimbabwe’s  debt sits at over usd17,5billion. This is a huge debt stock considering that half this debt is arrears that have to be cleared for Zimbabwe to re-engage with the multi-lateral institutions. Following the defaulting by Zimbabwe concessional credit lines from IMF, WB, AfDB have been blocked. Many efforts through the government of Zimbabwe to make token payments and to come up with its own debt resolution blue prints, coupled with the IMF Staff Monitored Programme have been to a large extent futile.

While some progress has been made on the economic growth front, the IMF and other independent observers note the many policy missteps militating economic recovery. Fiscal space remains constrained, human development curtailed with over half the population reported to be living in extreme poverty. This was exacerbated by the COVID-19 and the climate shocks that have seen the country suffer from droughts and cyclones such as the infamous Cyclone Idai in 2019.

Natural disasters have been one component of the crisis. The government has to a large extent failed to combat corruption and illicit financials in order to harness domestic resource to be able to respond to the ever growing citizen’s, infrastructural, social security and its labour force needs. According to the RBZ reports, Zimbabwe loses over USD100million/month through gold smuggling alone. While these leakages happen, the citizens continue to yearn for their constitutional rights such as health, education, water among others.

The acrimonious relationship between Harare & the West saw the advent of a new creditor and investor  of choice as reliance on China for development finance increased. This has strengthened the Look East Policy, then marshalled by Ambassador Chris Mutsvangwa when he was the Ambassador to China. The downside to it is that China extends loans at commercial terms, usually collateralized by mineral exports and other natural resources.

Based on the Zimbabwe’s high-risk profile, China extends loans collateralized by minerals. It is through these Resource Backed Loans that China has been accused on the debt trap diplomacy across the SADC region and Zimbabwe is not spared. captures and controls the desperate Zimbabwe government. Some of the examples show that; Zimbabwe  mortgaged 20 million ounces of platinum in 2002 in exchange for a US$200 million loan. Projects like the US$1.5 billion Hwange Thermal Unit 7&8 Expansion Project are backed by minerals like gold and nickel. It also funds vanity projects like the State House upgrade, Robert Mugabe Int’l Airport expansion, Beit Bridge Boarder Post Modernisation, conference facilities for ZANU PF, Parliament building, to mention but a few.

Chinese companies like Northern Industries Corporation (NORICO), Anhui Foreign Economic Construction (AFEC) through its subsidiaries Anjin & CMEC are also engaged in bartering arrangements with Zimbabwe. Hwange Colliery Company got mining equipment worth US$6 million in exchange for coke and diamonds.

This is unsustainable, and surely Zimbabwe has to find ways to resolve the debt crisis and move forward either by harnessing its own domestic resources for its developmental needs or by accessing them once again concessionary loans. Zimbabwe is currently re-engaging with its creditors to find the solution to the over two decades debt crisis which the previous and current governments have tried to clear for over twenty years using different debt resolution blueprints.

This process is led through technical assistance from the AfDB, which is one of the major creditors owed by Zimbabwe. It is ushered in by the 2022 Mid-Term Debt and Arrears Clearance strategy, Zimbabwe proposes measures to clear its arrears as the first step to re-engage with the international community. There has been a lot of excitement about the process which has renewed energy from the multi-lateral institutions, bilateral creditors, the private sector in Zimbabwe (because it has been crowded out in accessing loans at the domestic level, stifling investment and growth) and the government of Zimbabwe itself.

Two structured dialogues have been facilitated by the Zimbabwe facilitator, His Excellency, Joachim Chissano, former president of Mozambique. His role has been to have dialogue amongst a wide spectrum of stakeholders and set the new pathways of resolving the stalemate. The first structured dialogue held in Harare in December 2022, saw the kick starting of a three pinned process. The government developed reform matrices with indices that are targeted at political reforms, economic reforms and land tenure and compensation. Looking at the matrices and the indicators they are very close to addressing the long-standing crises.

The 2nd structured dialogue in February 2023, saw the proposed reforms being discussed and the goodwill the government of Zimbabwe is receiving from its creditors and its people reminds me of the euphoria of 2018 as the currently administration came into power. Everyone expected to see and feel a different kind of governance, there was hope and the few paranoid ones sent warnings not to do quick celebrations but to wait and see. Just like in 2018, the structured is hitting the right notes to a greater extent and we have to ask ourselves, are we finally here, are we going to bring to finality the elephant in the room and resolve our internal issues and move forward into the community of nations as a people that decided to have their home-grown solutions and found each other for a new era which is better for all.

Indeed, the structured debt resolution dialogue offers a window of opportunity to resolve the crises ordinary Zimbabweans have been subjected to for the past three decades. The fact that the dialogues has moved from being a dialogue about Zimbabwe, of Zimbabwe to being with Zimbabwe is good step. The facilitator, while in Zimbabwe, met separately with different sectors to gather views and perspectives and that is applauded. His standing, as a political leader in the region is commended by a number of people and the wish is for him to genuinely assist the government of Zimbabwe to not only ask the creditors to move but for the government also to meet its side of the bargain. This process is therefore expected to be a respectable process that will lead to respectable outcomes and take Zimbabwe from the current doldrums.

What remains to be seen is the commitment by the government of Zimbabwe to implement the espoused reforms under each pin outlined in the reform’s matrices. Zimbabwe has been known to squander opportunities by political bickering. Saying one thing and doing the opposite. Zimbabwe has to make political decisions that are strong, far reaching to see the societal change. These decisions have to be stated and implemented at the highest level and they rely on the president and his lieutenants in government.

The structured dialogue should continue as an open and transparent space which accommodates all. For its success, the facilitator together with the AfDB must ensure that the dialogue is hinged on the following pillars:

• Cohesion amongst the people of Zimbabwe.
• Trust amongst the stakeholders and particularly with the citizens. It has been decades of political mistrust.
• Commitment and honoring agreements made
• Broad dialogue- it is not just about settling debts but an opportunity to find each other
• Being realistic and reasonable about what can be achieved by the dialogue

Finally, the dialogue has to identify and focus on low hanging fruits that can enhance its chances of success. Indeed, there are short term deliverables that the government of Zimbabwe can focus on as it builds trust on this process. These include:

• Going once again through an elaborate Staff Monitored programme. The suggestions for a “wet” SMP are welcome in order to ensure a balance between citizens needs and the constricted fiscal space. Previous SMPs were “dry” with no liquidity offered to ease the burden on citizens.
• Delivering a free and fair election.
• Deliver on the Bilateral Investment Promotion and Protection Agreement (BIPPA)
• Opening up the civic space and collaborating with development partners to make livelihoods and lives better and freer for the people of Zimbabwe.

There is a world opportunity for Zimbabwe and no blame problem solving platforms that focus on reforms is the way to go.