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Zimbabwe misses US$50bn IMF windfall

Debt-distressed Zimbabwe will miss the US$50bn package by the International Monetary Fund (IMF) which will act as a shock absorber for countries to be affected by the effects of the coronavirus.

Zimbabwe’s economy is badly in need of a stimulus package after contracting by nearly 10 percent last year.

The country, which has a huge debt overhang, is currently ineligible to secure long-term funding from multilateral financial institutions.

Last week, IMF managing director, Kristalina Georgieva announced a US$50bn coronavirus shock absorber facility for low income and emerging market countries.

IMF resident representative to Zimbabwe, Patrick Imam said the global lender is “indeed looking at whether we can get extra funding to support Zimbabwe in its battle against the coronavirus shock”.

Imam said the US$50bn Catastrophic Containment and Relief Trust facility is funded by grants and Zimbabwe does not qualify as it has no debt service payment obligation to the fund.

Zimbabwe owes international financial institutions which has blocked the country from accessing cheap funding. “…even if eligibility criteria were to be relaxed given the current circumstances, this facility provides grants to cover upcoming debt services to the IMF.

Now given that Zimbabwe’s debt to the IMF is zero, there is no debt service to pay and hence this facility would not be of any use. We are therefore exploring alternative funding facilities,” Imam said.

He said the regular programme that IMF offers member countries that are severely impacted by the coronavirus, such as the Rapid Credit Facility, are currently not available to any country that is in debt distress and that has arrears to International Financial Institutions.

“Zimbabwe, however, still has arrears towards multilateral development institutions, notably the World Bank and the African Development Bank and the European Investment Bank.

The IMF rules don’t permit us to provide financial support in these circumstances.

Thus, before becoming eligible for financial support from the IMF, Zimbabwe will need to clear these arrears.” Coronavirus, also referred to as Covid-19, was first reported in Chinese city, Wuhan, in December last year. Total confirmed cases were 119, 132 while over 4, 200 had succumbed to the virus as of yesterday.

It had affected 115 countries or regions by yesterday. The virus, which has resulted in a lockdown in Italy and restrictions on travel that has hit airlines, is feared to trigger a recession.

The projected global recession will be a blow for a forex starved Zimbabwe which relies on imports of gold, chrome, platinum and tobacco to oil the economy.

One of the low hanging fruits, tourism, will also be affected due to reduced travels and reduction in the meetings, incentives, conference and exhibitions (MICE) business.

Already high level meetings have been postponed or cancelled.

ITB Berlin, one of the world’s leading tourism and travel shows, which was scheduled to run from March 4 to 8, was cancelled and the fair will not run this year.

Regional bloc, Sadc temporarily suspended all events to avoid the spread of the virus.

This affected the 57th Committee of SADC Stock Exchange meeting and 2nd Broker’s Networking Session that was scheduled to run from March 11 to 13 in Victoria Falls.

Reserve Bank of Zimbabwe governor John Mangudya said the drop in oil prices and firming gold price is a boon for the economy.

Zimbabwe imports fuel worth US$1.5bn annually. He said gold prices have firmed as investors abandon equities for the yellow metal which is a safe haven.

“The major market for tobacco is China; we do hope and pray the prices would remain the same,” Mangudya said.

Finance minister Mthuli Ncube said other countries are taking monetary and fiscal measures as shock absorbers and Zimbabwe will respond when the need arises.

“We stand ready to respond should the shock go beyond what we are expecting. The channels for the transmission of the crisis are clear: it’s through the tourism receipts channel and the exports receipts channel,” Ncube said.

Meanwhile, South Africa’s Health Minister Dr Zweli Mkhize has confirmed six new coronavirus cases in the country – taking the number of infected people to 13. All of the new infected coronavirus patients had all travelled back to the country from Europe.

The minister made the announcement yesterday. From the six new Covid-19 patients, four are based in Gauteng, while one each are from the KwaZulu-Natal and Western Cape provinces.

South Africa’s first coronavirus case was confirmed last Thursday, when a 38-year-old man who had travelled from Italy in a group of 10 on a skiing trip, was tested positive after he visited his local doctor. The wife also later tested positive, as did another person who was part of the trip. – Business Times


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