eBusiness Weekly
Business Writer
Zimbabwe plans to begin payments to Paris Club creditors, to clear its US$3.9 billion longstanding debt, in the second half of this year, Finance and Economic Development Minister Professor Mthuli Ncube has said.
Paris Club is a group of officials from major creditor countries whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries.
The club’s permanent members include the United Kingdom, the United States, Switzerland, Sweden, Spain, Russia, Norway, Netherlands, South Korea, Japan, German, Australia and Italy.
Presenting the 2021 budget review to Parliament last week, Minister Mthuli also said the country continued to make token payments to multilateral lenders, as its re-engagement efforts gather pace.
As at end December 2020, total public and publicly guaranteed external debt including RBZ external guaranteed debt amounted to US$10.5 billion, representing 71.2 percent of the country’s gross domestic product.
The minister said external debt arrears alone make up over US$6.5 billion (77 percent) of total external debt. Zimbabwe is trying to clear its external debt to reopen external lines of credit, after the major ones ended at the turn of the millennium.
The southern African country remains unable to secure funding from global lenders like the International Monetary Fund, although it cleared its debts in 2017, due to the pari passu rule, which requires all global lenders to be treated equally).
“Mr Speaker Sir, Treasury, in March 2021, resumed quarterly token payments to the Multilateral Development Banks (MDBs), the World Bank Group, the African Development Bank Group and the European Investment Bank.
“Token payments are part of the re-engagement process with the international community in line with the arrears clearance and debt relief strategy which is critical in regaining access to concessional financing from both multilateral and bilateral development partners. Payments to Paris Club Creditors will also begin in the second half of 2021,” he said.
Zimbabwe has continued to meet its external debt obligations despite present fiscal constraints and the devastating impact of the Covid-19 pandemic, Minister Mthuli said recently.
Figures from Treasury show that multilateral development banks are owed a total of US$2,6 billion (accounting for 32 percent of the total public and publicly guaranteed external debt), of which the World Bank Group is owed US$1,5 billion, the African Development Bank US$705 million, European Investment Bank US$330 million and other multilaterals US$66 million.
The total bilateral external debt amounts to US$5,48 billion (accounting for 68 percent of the total public and publicly guaranteed external debt), of which Paris Club creditors accounted for US$3,39 billion, and non-Paris Club, US$1,58 billion.
Around 70 percent of that debt consists of arrears and penalties for non-payment.
According to the finance minister, although payments to other lenders were on-going, China had granted Zimbabwe a moratorium on payments.
“For China we have received a moratorium, which is actually complying with the G-20 resolutions, that between now and December they can give us a stay of execution in terms of those payments. But we will resume payments again once we are supposed to resume,” the minister said recently
Earlier this year, the G-20 requested multilateral lenders to explore options for suspending debt service payments while maintaining the International Bank for Reconstruction and Development (IBRD)’s and the International Development Association (IDA)’s financial capacity, ratings, and low cost of funding.
The Covid-19 pandemic has affected most economies and has significantly affected many countries’ ability to service external debts, which may have a cyclical effect on the long-term performance of these economies.
“The impact (of Covid-19) globally has been devastating economies. We have seen the growth rate initially set at around 3 percent having been reviewed to around -8 percent for developing economies.
“But we are optimistic that this will be a V-type growth scenario, which means there might be a big decline this year and then we can expect a recovery next year. And for Zimbabwe we expect the same,” said the Treasury boss.
Experts say unsustainable public debt levels can have a negative impact on capital accumulation and growth through higher longer-term interest rates, inflation and greater uncertainty about economic and fiscal policies, among other factors.
SA: Lockdown, looting – how these showed up in consumer spending
Moneyweb
Recent transactional data shows how consumer spending took a hard knock from the Covid-19 third wave and stricter lockdown, as well as the unrest from the rioting and looting that occurred during the month. These two events have dented the country’s economic recovery in a short time.
BankservAfrica’s Card and Point-of-Sale (POS) transactional data measured consumer spending from the lockdown levels during the June to July period, as well as [during] the riots in KwaZulu-Natal and Gauteng in July. It also compares the spend over this period against the 2020 and 2019 figures.
“The massive dips observed in our consumer spending data in July 2021 are worrying, especially when compared against the previous months where the economy was making good headway against the 2020 slowdown,” says Shergeran Naidoo, head of stakeholder engagements: BankservAfrica.
During the main week of looting from July 11, the volume of card and ATM cash withdrawals declined from about 4.5 million transactions per day to about 4.3 million. This was, however, slightly alleviated by the panic buying in the two affected provinces.
Due to the Sassa grant payment dates and the looting, which started in earnest on July 9, the average number of transactions equalled 3.35 million for the 15 days to July 24 compared to the 3.69 million transactions for the same 15 days to June 24.
Transactions during the May/June lockdown levels
From May 31, when Level 2 lockdown was introduced due to the sharp rise in Covid-19 infections, the number of transactions dropped.
Transactions declined further when Level 3 was declared on June 15 and even further when Level 4 was announced on June 27.
It appears South Africans were taking a cautionary approach during the third wave. Spend was also affected by restrictions, such as the prohibition of alcohol sales, and for restaurants that were unable to operate.
The purple line in Graph 1 indicates the date that former South African president Jacob Zuma was imprisoned. In the days following, when disruptions began and led to the looting, spending remained about 5 percent below the same period two years ago. There is a slow recovery now.
The consumer spending impact from the Level 4 lockdown and the riots is quite substantial, and one can expect this to show a negative impact on June and particularly July economic data.
The estimated 9percent transaction decline over 15 days could be equal to about a 5percent decline for July for consumption expenditure.
The change in card and cash spending since 2020.
Interestingly, the 2020 data also shows a decline in the value of transactions from a very strong year-on-year growth in April and May (due to the very low base because of lockdown levels 5 and 4 during the same 2020 period).
Since adjusted Level 4 was announced on June 27 , transactions declined. South Africans have spent 3.1percent less in real terms. Spending dipped again on July 8.
The change in consumer spending on card and cash since 2019.
Due to South Africa being in the fourth month of the Covid-19 pandemic in July 2020, and under strict lockdown, the 2019 pre-pandemic figures have been used as a base to illustrate the impact on normal year transactions.
On this basis, South African consumers have spent around 5.2percent less since the adjusted alert levels 3 and 4 came into force in June 2021 when compared to 2019. The most recent change was -2.6percent.
In the days following Zuma’s imprisonment, when disruptions began and led to looting and rioting, spending remained about 5percent below the same period two years ago. There is a slow recovery now.
