Zimbabwe plans to set up an infrastructure development fund to raise money for major projects without relying on the national budget, Finance Minister Mthuli Ncube says.
As a first step, government is seeking to raise US$400 million from local financial institutions for key road projects, Ncube said in his mid-term budget review to Parliament. The money will be raised “against identified revenue streams”, allowing projects to be financed outside the budget. He said US$100 million has already been secured, awaiting some conditions. “The repayments of loans will be ringfenced from collections from ZINARA.”
The African Development Bank (AfDB) estimates that Zimbabwe requires US$34 billion over a decade to restore its core infrastructure. Many countries rely on low-cost loans from the likes of the World Bank and the AfDB to fund infrastructure. But Zimbabwe is cut off from such loans because it owes about US$2.7 billion in arrears to the three main institutions that typically finance large projects: US$1.5 billion to the World Bank, US$740 million to the African Development Bank and US$435 million to the European Investment Bank.
“As part of this initiative, an arrangement has been made with local financial institutions to mobilise US$400 million loan towards completion of the remaining 33km on the Harare-Beitbridge Road, construction, rehabilitation and maintenance of the Harare-Chirundu Road and Bulawayo-Victoria Falls Road, among other high priority road projects,” Ncube said.
Without access to concessional funding, government has largely paid for infrastructure through the budget. This has added pressure to public finances, fuelled inflation and built up damaging debts to local contractors.
By mid-year, the Ministry of Transport had already used up 108% of its full-year budget, mainly on road projects. Transport Minister Felix Mhona recently told Parliament that limited funding had slowed work on the key Bulawayo-Victoria Falls Road. His ministry received the equivalent of just US$150 million this year for road projects nationwide.
Government had previously proposed a build-operate-transfer (BOT) model for the Bulawayo-Victoria Falls highway, but industry experts question whether traffic volumes are high enough to make the project commercially viable.
cc: newZWire