Zimbabwe falls behind with debt repayments

The government is using currency reserves to buy fuel

Zimbabwe has sharply criticised the International Monetary Fund (IMF) which confirmed on Thursday that the country was late with its debt repayments.

"I don't know about stopping repayments, but I know the Zimbabwe government is late in repayments dating back to February," said IMF's representative to Zimbabwe, Gerry Johnson.

They cannot meet the objectives of poverty alleviation and debt relief for the poor countries as long as they put the political interests of the donors first.

Willard Chiwewe
Zimbabwean Foreign Affairs secretary

The IMF was responding to a report in Zimbabwe's Financial Gazette that the southern African country had stopped all foreign debt repayments.

The economy in Zimbabwe has been under severe strain since international creditors halted loans in 1999 and there has been speculation of an imminent currency devaluation.

IMF criticism

Zimbabwe responded by sharply criticising the IMF saying they pursued the political objectives of donor countries rather than helping the poor of the developing world.

"They cannot meet the objectives of poverty alleviation and debt relief for the poor countries as long as they put the political interests of the donors first," Zimbabwean Foreign Affairs senior secretary Willard Chiwewe said in a prepared speech.

Zimbabwe is reported to have low foreign currency reserves and is using them to pay for vital fuel and electricity imports to keep the country going rather than repaying its foreign debts.

Credit rating blow?

A default on the IMF loans would be another serious blow for Zimbabwe's credit rating and make it very difficult to secure loans, adding to the countries economic difficulties.

"We have been in touch with them about the problem as is the normal procedure and they have told us they are doing the best they can to address it," Mr Johnson said.

Finance Minister Makoni wants to raise money from privatisations.

Zimbabwe's government owes more than $4.5bn to the African Development Bank, the European Investment Bank, the World Bank and a number of Western countries.

The Finnish and German embassy officials in Harare both told the paper that Zimbabwe was in arrears on debts.

Mr Johnson said Zimbabwe had accumulated $25m in arrears with the IMF since February.

President Robert Mugabe has repeatedly accused the IMF and the World Bank of allowing themselves to be used by Western powers to further their political agendas against his government.

IMF-led foreign aid donors halted funding to Zimbabwe in 1999 over policy differences with the Mugabe government.

Donors opposed Zimbabwe's military involvement in the Democratic Republic of Congo, and the seizure of white-owned farmland for black resettlement without full compensation.

Economic reform

In his 2001 budget speech last November, Finance Minister Simba Makoni said that the government would speed up privatisations to help pay off accumulated interest on foreign debts of $488m.

In March a visiting IMF team said it was worried about Zimbabwe's deepening economic crisis and the build-up of its arrears to the Fund and the World Bank.

Since then, the state has only sold its equity in the Cotton Company of Zimbabwe and Dairibord Zimbabwe.

Fuel shortages

Zimbabwe's foreign currency shortage has led to erratic fuel supplies over the past 18 months.

The crisis heightened earlier this week when the country's main fuel supplier, Independent Petroleum Group of Kuwait, suspended delivery over non-payment.

In March, South African power utility Eskom, which provides 13% of Zimbabwe's electricity, said Harare would have to pay up-front after defaulting on its debt in 1999.