Strange case of Zim's IMF's repayment

EDITOR — On October 28, 2016, Zimbabwe utilised part of its Special Drawing Rights (SDRs) to settle the $108 million it owed to the International Monetary Fund (IMF)’s Poverty Reduction and Growth Trust Fund (PRGT), which funds were held and kept at the IMF.

The timing of this payment and the payment itself is clearly absurd and irrational that all reasonable Zimbabweans have smelt a rat and cried foul.

In the eyes of many, the regime and the IMF are clearly brewing yet again another shocker to prop up the former.

That process is being pursued as a last-ditch attempt to save the all but dead Lima process which in the eyes of many was nothing but an excuse to finance a desperate regime.

In 2011, the Government of Zimbabwe tried to pay off its debt to the IMF using its SDRs but the same IMF refused for correct legal, economic strategic reasons.

It is, therefore, shocking and frightening now, six years later when Zimbabwe is now in a more fragile position that the IMF has changed its position.

The first objection by the fund in 2011 was that the clearance of the IMF arrears when Zimbabwe has so many creditors amounted to an unfair and unlawful preferential treatment of one creditor against others.

It is trite at law that an insolvent debtor in the position of Zimbabwe cannot make a special payment to one creditor at the prejudice of the other creditors.

Zimbabwe owes at least

$9 billion of which $3,4 billion is owed to bilateral creditors mainly the Paris Club

and $2,5 billion to the World Bank.

The World Bank is owed at least $2 billion while the African Development Bank (AfDB) is owed $550 million.

Under these circumstances, both domestic and international law would not allow preferential payment to one creditor.

The multilateral institutions themselves have a rule — the pari passu rule — which requires equal treatment of all creditors.

In paying the fund in preference to others, the regime has clearly breached the pari passu rule.

More significantly, by accepting the money without the World Bank and the AfDB being paid, the IMF is complicit and in fact facilitating the breach of well-established financial rules.

The question remains; Why is the IMF doing this?

PDP

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