A street vendor sells food, refreshments and mobile phone airtime vouchers on a roadside at dusk in Harare, Zimbabwe. Photographer: Waldo Swiegers/Bloomberg

INTERNATIONAL - The African Development Bank said it’s working with Zimbabwe’s government to find a “sustainable solution” to settle its debt arrears and enable the state to start borrowing again.

Zimbabwe owes multilateral lenders about $1.8 billion. President Emmerson Mnangagwa has said he plans to prioritize the repayment of the loans as he sets about rebuilding an economy destabilized by almost two decades of mismanagement under his predecessor Robert Mugabe. Central bank Governor John Mangudya said last week he expects the arrears to be cleared by September 2019.

The AfDB, which Zimbabwe owes $600 million, has reached a consensus with other lenders including the International Monetary Fund and World Bank about how the state should settle its dues, country manager Damoni Kitabire said.

“The emphasis for us is let’s find an option that will ensure at the end of the day Zimbabwe’s debt is sustainable,” Kitabire said. “You don’t want to pay us or pay whoever and you are in a worse-off condition.”

Zimbabwe began defaulting on its debt obligations in 1999, resulting in lenders cutting off further loans. The state also owes debt to the Paris Club of creditors, which Finance Minister Mthuli Ncube said this month the government will also hold discussions with.

Growth Target

An IMF delegation began a week-long visit to Zimbabwe this week and will meet officials including Mangudya and Ncube, Kupikile Mlambo, deputy governor of the Reserve Bank of Zimbabwe, said in an interview Friday in the southern city of Bulawayo. He declined to discuss the agenda of the meetings.

Mnangagwa’s government is targeting an annual economic growth rate of at least 6 percent over the next five years, attracting $5 billion in foreign direct investment and $10 billion in domestic investment annually. The president has pledged to revive agriculture, mining and manufacturing to accelerate economic growth, which the International Monetary Fund forecasts will be 2.4 percent this year, compared with 3 percent in 2017.

The president has said he also plans bonds to finance the development of infrastructure, the decay of which contributed to an outbreak of cholera in the capital, Harare, this month that killed at least 45 people.

“Given the challenges we are seeing as a country, when you see cholera it’s just telling you that you are not paying attention to your water and health,” Kitabire said. “If you are paying your debt at the cost of lives, then something is wrong.”

Over the past three years, the AfDB has given Zimbabwe $223 million in grants, but is unable to provide new loans until the outstanding ones are repaid, he said.

“Our problem in Zimbabwe is entirely with the arrears that Zimbabwe owes us,” he said.

- BLOOMBERG