Zimbabwe’s economy could be on the path to recovery as international investors rediscover the southern African country after more than 15 years of frosty relations with western capitals.
A German business delegation led by the head of the German African Business Association, Christoph Kannengiesser, is visiting Zimbabwe on a three day mission beginning Monday October 19, 2015.
According to a statement released by the Germany embassy in Harare last week, the program of the visit comprises meetings with government representatives, a business roundtable and a workshop focusing on doing business in Zimbabwe.
The German African Business Association (Afrika Verein der deutschen Wirtschaft) is the foreign trade association representing more than 500 German companies and institutions with an interest in Africa.
The upcoming visit of a German business delegation to Zimbabwe is the second this year.
In April 2015, a group of companies from the mining and mineral resources sector made a trip to Zimbabwe.
Meeting in Lima
A fortnight ago, international creditors accepted a debt clearance plan by Zimbabwe under which it would clear its arrears with international lenders by April 2016.
Zimbabwe presented its debt clearance plans on the sidelines of the 2015 IMF/World Bank meeting in Lima, Peru
This was announced by Zimbabwe’s Finance Minister Patrick Chinamasa following a meeting in Lima, Peru.
“I am pleased to report that there was strong endorsement among creditors to support Zimbabwe's strategy to clear the arrears to the three International Financial Institutions (IFIs) as preferred creditors,” Chinamasa said in a statement.
“The road map to clear arrears by the end of April 2016 allows for time for the IFIs to develop a new financing program for Zimbabwe,” he added.
Zimbabwe owes in excess of $1.8 billion (1.6 billion Euros) to the International Monetary Fund (IMF), World Bank and African Development Bank (AfDB). This has blocked access to fresh loans from potential lenders.
International lenders are keen to see Zimbabwe, which needs more capital, clear its arrears before they commit any fresh loans.
According to Chinamasa, Zimbabwe’s arrears clearance strategy includes a combination of the country's own resources, bridge finance with regional and international banks and bilateral loan facilities.
Clearance plan too ambitious
Prosper Chitambira, an economist with the Labor and Economic Development Research Institute of Zimbabwe, thinks Zimbabwe’s debt clearance plans are too ambitious considering the slow economic growth recorded by the country in recent years.
Economic growth picked up when Zimbabwe abandoned its own currency in favor of the US dollar
“It is difficult to see how Zimbabwe is going to attain some of the benchmarks. Our exports have not been performing very well. It requires a combination of structural reforms to grow the economy. The only short term benefit is this development will galvanize reengagement efforts with bilateral and multilateral lending institutions,” said Chitambira.
The debt clearance strategy also involves engagement of the European Investment Bank, the Paris Club and non-Paris Club bilateral lenders such as China.
The Paris Club is an informal group of creditor governments which seeks to find solutions to difficulties experienced by debtor countries.
Zimbabwe's total external debt stands at $10.8 billion, according to Chinamasa, of which $6.8 billion is public debt and remainder private sector loans.
The country's arrears with the three IFIs are broken down as AfDB ($601 million), IMF ($110 million) and World Bank ($1.15 billion).
Zimbabwe's economy, which declined by as much as 40 percent between 2000 and 2008, according to government figures, started to recover in 2009 when it abandoned its currency in favor of the US dollar under a power-sharing government formed by long-ruling President Robert Mugabe and the opposition.
Former Finance Minister Tendai Biti says Zimbabwe needs debt cancellation and far-reaching structural reforms.
However, growth has stalled since 2013.
In a recent address to parliament, Mugabe admitted his country needed a massive injection of capital from the international community to boost economic growth.
Need for structural reforms
Tendai Biti, who was finance minister in the power-sharing government which is no longer in office, believes the debt clearance plan accepted in Lima is not sustainable.
“Zimbabwe´s debt can only be solved through debt cancellation by the international creditors, but this requires serious structural reforms. The reforms should be both on the political and human rights front. There are also technical issues on the economic front,” Biti said.
“It is those things that are so foreseeable that the ZANU PF government cannot deal with them and cannot attend to,” the opposition politician added.
Zimbabwe´s debt began to mount up in 1999 after the country defaulted on payments to creditors.