ZIMBABWE is in discussions with Zambia over payment modalities for the US$114,8 million interest on the Federation-era debt that Harare owes its northern neighbour.
The debt has been threatening co-operation between the two countries on the proposed construction of the massive Batoka power project.
Finance and Economic Development Minister, Patrick Chinamasa, last week told journalists that the two countries were currently in discussions and could soon strike a deal on payment.
“The debt is still about US$114,8 million in interest but we have started engaging them (Zambia) on how we can pay it. But we don’t want to discuss it in public. When we are done with our discussions, we will let you know,” said Chinamasa.
The interest component emanates from a US$70 million debt to Zambia which the country inherited the debt after taking over power generation assets that had been shared with Zambia.
The debt was for the shared cost of the Kariba Dam construction and associated infrastructure during the tenure of Central African Power Corporation (CAPCO), a power firm jointly owned by the governments of Zimbabwe and Zambia when they were still part of the Federation of Rhodesia and Nyasaland, which was dissolved in 1963.
The debt also included assets taken over from CAPCO.
The US$70 million principal amount has since been paid off by the country’s integrated power generation and distribution group, ZESA Holdings.
ZESA, however, through the assistance of the Ministry of Energy and Power Development, transferred the interest component from its books to the Ministry of Finance in 2015, arguing that the liability was a government-to-government debt.
CAPCO was running the Kariba power project for the two countries but was disbanded in 1987, and was succeeded by the Zimbabwe River Authority (ZRA).
Its assets were distributed to national power companies in the two countries, which are ZESA Holdings and Zambia Electricity Supply Corporation (ZESCO).
After distribution of the assets, the government of Zimbabwe owed the government of Zambia US$70,807,000.
The amount remained outstanding, and Zimbabwe in February 2012 signed a new acknowledgement of debt with a payment plan.
Government then transferred the debt to ZESA Holdings saying it was the beneficiary of the distributed assets.
ZESA Holdings was, however, pressured to pay the principal amount after Zambia threatened to pull out of a deal for the two southern African countries to jointly construct the Batoka Gorge Hydro Power Station on the Zambezi River.
Zimbabwe and Zambia signed a Memorandum of Understanding to jointly construct Batoka Gorge Hydro Power Station in 2012, with each country expected to get 1 600 Megawatts (MW) of electricity from the project, a development which would help boost power supply in the two southern African countries.
The agreement on the Batoka project, situated about 54 kilometres downstream of Victoria Falls on the Zambezi River, was therefore dependent on Zimbabwe’s commitment to pay off the US$70,8 million debt. – Fingaz