IMF and other international institutions cannot lend to Harare because of debt arrears

Zimbabwe has pleaded with international institutions to help it clear billions of dollars in debt arrears so the country can avoid economic collapse and unlock funds to fight the coronavirus pandemic.
Without urgent aid to clear arrears owed to official lenders, the southern African nation faced “domestic collapse”, Mthuli Ncube, finance minister, told the IMF, African Development Bank and other institutions in a letter seen by the Financial Times.
The IMF and other bodies have pledged billions of dollars in emergency loans to help African nations battle the pandemic and shore up locked-down economies. But Zimbabwe – along with Sudan and Eritrea – is excluded from such funds because of its longstanding arrears.
The country is about $2bn behind on payments to official lenders including the World Bank and AfDB, although it has paid off the IMF.
In a sign of its desperation to access funds, the government led by President Emmerson Mnangagwa took responsibility in the letter for “recent policy mis-steps”, which have included state payouts to a company led by a close ally of the president.
Last year, the payouts to Sakunda, a fuel importer headed by Kudakwashe Tagwirei, were financed with money-printing that triggered a currency collapse and a warning from the IMF.
Sakunda was not mentioned by name in the letter but the payouts have widely been seen as a mis-step. Zimbabwe has never admitted wrongdoing over the Sakunda matter. The company denies any wrongdoing.
A subsidy for gold miners that was financed with money creation also alarmed the IMF when it was uncovered, according to people familiar with discussions between the fund and the government.
“Zimbabwe breaks my heart every day,” a senior official at the IMF said. “I know the path forward for other countries, but the thing that stops it is arrears to the World Bank and the AfDB. Then there’s the bigger issue of politics.”
Mr Ncube, a Cambridge-educated mathematician, was plucked from academia by the government in 2018 to fix the economy. But his efforts have been stymied by mismanagement and corruption within the government, an official from an international finance institution said.
In the letter – first revealed by Africa Confidential, a specialist newsletter, and sent last month – Mr Ncube asked for “urgent and high-level dialogue” on a bridge loan to clear the multilateral arrears, as well as the rescheduling of other overdue debts owed to governments.
In return for help, Zimbabwe would pledge to halt central bank money printing and “eliminate discretion in the allocation of foreign exchange”, he said.
Zimbabwe’s finance ministry did not immediately respond to a request for comment.
The IMF official said its hands were tied by its rules about arrears and that Zimbabwe would need to seek support from a bilateral partner, such as Britain. “We continue to engage with the authorities on their challenging economic situation,” the fund said in a statement.
Zimbabwe has reported 40 coronavirus cases and four deaths to date, but economic chaos and lack of investment have left the public health system struggling to respond.
The pandemic has struck in the middle of a food crisis in the country, with millions of people facing hunger. A lockdown in neighbouring South Africa, where many Zimbabweans work, has severely reduced the flow of remittances to the country, worsening an already dire economic situation.
In March, inflation climbed to 676 per cent year on year, according to official numbers.
Mr Mnangagwa’s cash-strapped government is relying on private donations to fight the pandemic.
Sakunda has outfitted a hospital in Harare, the capital, to treat coronavirus patients and has secured millions of dollars worth of medical protective gear from China.