BY SHAME MAKOSHARI
ZIMBABWE’s $1.86 trillion debt breached prescribed thresholds under the Low-Income Country (LIC) Debt Sustainability Framework, exposing the country to rollover risks, the Debt Management Office said. public.
The $1.86 trillion translated into about $17.5 billion at the end of last year, with $6.6 billion in arrears.
In the Annual debt bulletin Financial year 2021 report released two weeks ago, the office said the total government debt-to-gross domestic product (GDP) ratio, estimated at 50.9% during the period, was well above the recommended 35%.
He said arrears were the biggest threat to Zimbabwe’s ability to refinance debt.
“At the end of December 2021, the nominal ratio of total debt to GDP (was) estimated at 62.1%, which is within the legislative limit of 70%, provided for in article 11 of the law on the management of public debt,” the report said. .
“However, the present value of the ratio of total public debt to GDP is estimated at 50.9%, compared to a threshold of 35% prescribed under the DSA of low-income countries (LICs). External debt cost and risk indicators are affected by the continued accumulation of external debt arrears,” the report further noted.
“The weighted average interest rate of 0.2% is relatively favourable, while the average time to maturity of 3.9 years and the average time to reset of 3.9 years are relatively low, reflecting arrears due and payable on sight, resulting in significant exposure to refinancing risk.
“This is also reflected in the external debt maturing in one year as a percentage of total debt at 31.8% and the refixing of external debt in one year as a percentage of total debt at 46.6%. This indicates that arrears suspend increased refinancing risk for the debt portfolio.
“The portfolio is vulnerable to currency risk, as indicated by the fact that external debt represents 78% of total debt, as well as short-term external debt to international reserves of 681.8%.
He said this implied that any movement in exchange rates would have a “significant impact” on the portfolio and increase the cost of servicing debt.
The report says the Zimbabwean administration, in debt last year, has struggled to access new loans to step up ambitious plans to revamp key infrastructure projects after racking up large arrears on lifelines from one of China’s largest lenders.
The report notes that arrears to China Eximbank increased during the period, frustrating efforts for new disbursements, even as Harare honored its promise to send token payments to several global lenders, including the Club of Paris. China Eximbank has been one of the most active major lenders in the domestic market, where it has financed crucial public infrastructure projects, including airports and power stations.
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