Zimbabwe president wants new currency, IMF loan in revival bid

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Matthew Hill and Prinesha Naidoo, Bloomberg

Mnangagwa says he hopes to launch a new currency, which his finmin has prepared ground for, by the first quarter of next year, latest.
Zimbabwean President Emmerson Mnangagwa and his finance chief want a new currency by March, would welcome funding from the International Monetary Fund and may even consider a Eurobond offering as the struggling economy emerges from more than a decade of isolation.

The introduction of a new currency is crucial to his efforts to revive the economy, said Mnangagwa, who secured a five-year term in July elections after the military deposed Robert Mugabe in 2017.

“It is necessary that we have our own currency,” he said in an interview in Maputo, Mozambique’s capital, where he was attending a conference. “I have faith that we’ll achieve that even before the end of the year or by the first quarter of next year.”

The state abolished Zimbabwe’s currency in 2009, after an episode of hyperinflation rendered it worthless. Since then, the southern African nation has used a basket of currencies, including neighbouring South Africa’s rand and the US dollar. The country has a quasi-currency known as RTGS.

Budget surplus

Mnangagwa said his finance minister, Mthuli Ncube, has prepared the ground for a new currency — starting with the first budget surplus he can recall in decades.

“I’ve been in government for 38 years as minister and I can’t remember when you ever had a budget surplus,” Mnangagwa, 76, said. “Now, this young man has been able to achieve a budget surplus in less than eight months. So it tells me that what he tells me is possibly true on these issues.”

The government last month agreed on measures to re-engage with the IMF for the first time in more than a decade. Under the arrangement, known as a staff-monitoring program, the fund will assess government’s economic progress by the end of January, Ncube, 56, said in the interview.

Bilateral creditors

After that, the government plans to access bridge financing to clear about $1.2 billion of arrears to the World Bank, African Development Bank and the European Investment Bank, he said. Next, is a plan to restructure debt owed to bilateral creditors.

“The first order of business is to clear the arrears and then move onto phase two, which is the bilateral discussions with the Paris Club,” Ncube said. “If it works well in the first phase, it’s the same Paris partners who control those two big institutions that I was talking about, the same people. So if they accept supporting us on the same program with the European Investment Bank, surely they will support us on the bilateral phase as well.”

Asked if Zimbabwe would seek financing from the IMF next year, Ncube said:

“Why not? We can only ask, they can only say no. But if we can get funding from the IMF that would be fantastic. Just additional support on our balance-of-payments position.”

And on the possibility of selling dollar debt thereafter:

“It’s possible, I would say late next year. At the moment you cannot go into the Eurobond market, which is commercial debt, while you still owe concessional debt. It doesn’t work like that.”
“So that’s the sequence. Once we have cleared this, at least the preferred creditors in February — the IMF, World Bank and the European Investment Bank — then after that point can we go into the market.”

© 2019 Bloomberg L.P.

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