Zim struggles to service DBSA loans

HARARE - Zimbabwe's cash-strapped government said it is struggling to service its $206 million loan sourced from the Development Bank of Southern Africa (DBSA) due to deteriorating economic conditions.

The funds, which were secured during the Government of National Unity period, were used for the rehabilitation of the 820-kilometre highway from Plumtree-Bulawayo-Harare-Mutare.

However, since President Robert Mugabe won the 2013 elections under controversial circumstances, the country has been battling an economic crisis that has seen businesses shed jobs and companies close down, prompting the government to default on major obligations, including payment of civil servants salaries.

Finance minister Patrick Chinamasa said government was seeking various ways to re-negotiate the loan repayment scheme.

“The servicing of the Development Bank of Southern Africa Facility is proving to be heavy. To this end, the ministry of Transport, together with the Zimbabwe National Road Administration (Zinara), have opened negotiations with DBSA on this challenge,” he said.

This was after Zinara only paid $21,8 million to DBSA in the first half this year out of a total collection of $74,6 million.

Market watchers, however, say Zimbabwe’s failure to service its obligations could explode into a diplomatic tiff between Harare and South Africa, which guaranteed the loan.

This comes as the country, which requires $14 billion to repair its crumbling infrastructure that has been affected by years of neglect, used the multiparty transaction as a catalyst to rebuild a seamless road transportation system that would enhance regional trade, improve foreign direct investment and increase revenues into the fiscus through several related taxes.

The deal was also key to reigniting economic recovery for the country, which has entered its 16th year in turmoil, at the same time improving safety conditions on roads plagued by a scourge of traffic accidents.

Economic hardships that have blighted Zimbabwe had hit on government’s ability to fund infrastructure rehabilitation.

Meanwhile, Chinamasa expressed concern over $14,8 million that was disbursed to local road authorities, which he said remain low, particularly for urban and rural councils where late submission of acquittals undermine further disbursements to the councils.

“The proportion of staff and other fixed costs, at 35 percent of expenditure, is too high and constrains the Road Fund to meaningfully provide resources for the maintenance of the 88 200km road network in the country,” the Treasury boss said.

“It is, therefore, critical that the cost structure of the Fund is re-examined with a view to creating additional space for support towards road construction and maintenance programmes,” he added.

In a globalised environment where economic opportunities are now dependant on the mobility of people, goods and information, the transport sector now plays an increasing important role in the transformation of economies.

In this regard, Chinamasa said, strategies aimed at addressing the deficiencies that currently exist in our transport systems are central to our economy, with the Budget channelling $28 million during the first six months of the year towards the rehabilitation and upgrading of our road network, as well as airports.

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