No SWF anytime soon: NKC

HARARE - Zimbabwe lacks capacity to issue sovereign bonds for its Sovereign Wealth Fund (SWF) at the moment, a regional think-tank has warned, following a government announcement on launch of the fund shortly impending polls this July.

Thwarting deputy Finance minister Terrence Mukupe’s claim that the country was considering issuing between $2,5 billion to $3,5 billion in sovereign bonds after election, NKC Africa Economics (NKC) analyst, Jee-A van der Linde, dismissed the announcement as a pie in the sky.

“The likelihood of Zimbabwe launching a sovereign wealth fund so soon seems small. It is important not to get caught up in all the hype: there has been a lot of encouraging undertakings but not much actual progress in Zimbabwe.

“The best course of action would be to wait and see how the upcoming elections transpire and see how things develop from there,” van der Linde said yesterday.

Mukupe on Tuesday told State media that the money would be used to clear arrears owed to some foreign lenders with repayment of the bond said to be anchored on trade receivables originating from tobacco, gold and horticulture.

According to the deputy minister, the bond would be repaid in annual instalments of between $140 million to $150 million. Furthermore, the Zimbabwe government is also reportedly flirting with the idea of creating a sovereign wealth fund once elections are completed in July.

But Van der Linde pointed out that while officials believe that it was feasible to produce a SWF, or successfully issue an export-related bond, post-election, he idea remained impractical.

“However, there are still a couple of key factors that may thwart such an issuance. Firstly, Zimbabwe still needs to deliver a vote that is seen as free and fair by the West, before the country would be able to unlock any meaningful forms of foreign funding or investment.

“Secondly, the country is beset by serious liquidity shortages and very low levels of foreign currency reserves, and it is struggling to revive ailing industries that are needed to fund a potential bond issue in the first place.

“Finally, Zimbabwe’s debt situation is in a calamitous state, with government debt standing at $12,7 billion (around 75 percent of GDP) by the end of 2017 and total external debt estimated at $9 billion (almost 54 percent of GDP),” she said.

While speaking in London at a Chatham House event, Foreign Affairs minister Sibusiso Moyo also said that Zimbabwe remains committed to clearing its debt obligations with the World Bank, African Development Bank (AfDB) and other financial institutions.

The Southern African nation has not received funding from the World Bank, International Monetary Fund or the AfDB since it defaulted on its debt in 1999.

Zimbabwe needs to clear nearly $1,8 billion in arrears with the World Bank and AfDB before it can get access to other sources of development financing.

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