Zimbabwe is currently seeking bridge financing amounting to US$2 billion to settle its outstanding arrears with major international financial institutions such as the World Bank and the African Development Bank (AfDB). This financial strategy aims to normalize Zimbabwe’s relationships with these institutions and unlock further financial support.
Finance Minister Mthuli Ncube highlighted this initiative in response to NewsDay Business inquiries, stressing the critical need for this financial maneuver as part of Zimbabwe’s broader efforts to stabilize its economic interactions on the global stage. At present, Zimbabwe owes approximately US$1.5 billion to the World Bank and an additional US$680 million to the AfDB, debts that have significantly hindered the country’s ability to access affordable financing options.
The concept of bridge financing that Zimbabwe is considering involves securing a temporary loan that would be in place for just 24 hours, long enough to clear the existing arrears. Minister Ncube emphasized the necessity of engaging multiple sponsors for this ambitious financial operation, explaining that the magnitude of the sum requires backing from more than one source to distribute the risk and increase the feasibility of the plan.
Minister Ncube recently spoke about the need for a sponsor to help Zimbabwe clear its arrears. This is a traditional method and a way to effectively manage financial rehabilitation efforts. A sponsor provides a bridging loan for 24 hours, and Zimbabwe needs around US$2 billion. To clear the arrears of the World Bank and the AfDB together, multiple sponsors will be required. Sudan and Somalia have also needed numerous backers in the past.
The minister further assured that Zimbabwe has been making token payments to its creditors, which helps to enhance the country’s credibility and trustworthiness among international financiers. This ongoing commitment to making regular payments is part of Zimbabwe’s strategy to maintain and build confidence among its financial partners. “We are making small payments to the World Bank, AfDB, European Investment Bank, and the 16 Paris Club partners. It is crucial to maintain these payments for building confidence in Zimbabwe,” said Ncube.
Zimbabwe is taking a comprehensive approach to managing its international debts. In addition to bridge financing, the country is implementing a new taxing regime that is expected to generate approximately US$250 million annually. This revenue will be used to support the country’s fiscal obligations and manage the costs associated with servicing debts, including those incurred from the central bank and under the Blocked Funds Programme. The effort to clear these arrears is receiving significant international cooperation. Former Mozambique President Joaquim Alberto Chissano is aiding Zimbabwe through its debt and arrears repayment plan, which is supported by the AfDB.
