U.S. Senate may stop Zimbabwe from getting new lending

In 2014, Patrick Chinamasa, Zimbabwe’s finance minister, appealed to the African Development Bank (AfDB) to write off $500 million of Zimbabwe’s debt. The bank declined. The International Monetary Fund (IMF) also said last year that before Zimbabwe can get loans from international lenders, it needs to strengthen its economic reforms to make sure it can repay its debt. The World Bank had also said Zimbabwe, whose debts run into $10 billion, would not enjoy debt relief as it has capacity for a sustainable economic recovery. The Southern African country is, therefore, not considered under the global lender’s Heavily Indebted Poor Countries (HIPC) Initiative.

As Zimbabwe battled with its economic challenges, longtime partners China announced it was canceling $40 million worth of Zimbabwe’s debt due to mature in 2015. Although the country which started defaulting on its debt in 1999 does not qualify for new financing until it clears the arrears, the IMF, the World Bank and the AfDB may be clearing Zimbabwe’s $1.9 billion in unpaid arrears to them, making it eligible for more loans. The United States Senate Committee on Foreign Relations has an objection to this and it has its reasons.

“While the willingness of a country to meet its debt obligations should normally be embraced, in this case arrears clearance will allow for new lending to the Government of Zimbabwe. Without meaningful progress toward long awaited reforms by the Mugabe regime, new lending could significantly alter internal political dynamics and help entrench the very same individuals responsible for the country’s economic collapse and gross human rights violations,” the committee wrote in a letter to Honorable Jacob Lew, Secretary of the U.S. Treasury.

The committee is asking the United States to use its voice and voting powers at these lenders, as well as influence with creditors, to ensure that if Zimbabwe would get any new lending, including one intended to relieve existing barriers to lending, it must be given some conditions. These include clear benchmarks for the restoration of the rule of law in Zimbabwe, a credible process of accountability for missing revenues from diamonds and official acknowledgement of past gross human rights abuses and a demonstration of readiness to remedy such.

Bob Corker who signed the letter by the U.S. Senate Committee on Foreign Affairs stressed that without meeting these conditions, a new lending will not help Zimbabwe but hinder progress toward democratic governance and economic growth.

“We urge the Treasury Department to act quickly to raise the lack of clear and meaningful governance and economic reforms with the IMF, World Bank, and African Development Bank, and to encourage creditors to require such reforms before supporting any new lending to the Government of Zimbabwe,” Corker wrote.

The United States has 16.74 percent of total votes, the highest by any country, in the IMF Board of Governors. All powers of the IMF are vested in the Board of Governors, which consists of one governor and one alternate governor for each member country. The governor is appointed by the member country and is usually the minister of finance or the governor of the central bank. The voting powers of the U.S. extends to the AfDB where it has the highest voting power of all the 26 non-regional members.