Page 6 - WEEKLYDIGEST 13042022

COVER April 13-18 2022 Weekly Digest 6

Why

Zim's

growing

debt is a

cause for

alarm

wheel – negotiate contract terms directly back period. Stop borrowing! Instead cre- quasi fiscal activities, loans and guaran-
MELODY CHIKONO with contractors for projects to avoid inter- ate a better investment environment.” tees by government, as well as interest and
est accruals decades before project pay- The Reserve Bank of Zimbabwe (RBZ) penalties on debts, have also been seen as
EBT and development experts
have asked government to cre-
ate a more friendly investment
environment and stop borrow-
D ing to help reduce the debt
burden on Zimbabwean.
In its latest report the International Mon-
etary Fund (IMF) said the county’s consoli-
dated public sector debt had ballooned to
US$19,03 billion representing a 68,1% ratio
to the Gross Domestic, as arrears continue
to weigh on the principal debt.
The threshold is way above the accept-
able ratio, with public and publicly guar-
anteed external debt standing at US$17, 59
billion, of which arrears are at US$13,1 bil-
lion.
Zimbabwe has been in debt distress

since 2000, when it first defaulted on its
external obligations to the International Fi-
nancial Institutions (IFS). The defaults re-
sulted in the country being denied access
to external financing by IFIs and other mul-

tilateral and bilateral creditors. POWERIDE ELEPHANT HILLS
Heavy indebtedness is at the core of
many African countries’ socio-economic
development challenges and Zimbabwe
has been no exception where public ex-
penditure financing has been diverted to

debt servicing, resulting in citizens failing
to access to basic services such as health,
education, water, and sanitation.
Discussions at the just ended Zimbabwe
Debt Indaba organised by Zimbabwe Co-
alition for Debt and Development (Zim-
codd) last week show that these were not
just numbers but drivers of poverty and in-
equality in Zimbabwe and the reason why
women in Binga, for instance, struggle to
access maternal health care.
Key drivers of the debt o cially record-

ed as US$13,7 billion in December 2021, are
embedded in governance challenges post
the 2000 land reform programme and the
country’s involvement in the 1998 Demo-
cratic Republic of Congo war which pre-

cipitated extrajudicial fiscal processes cov-
ered by an overdraft from the central bank.
A 1997 3% compensation awarded to
more than 60 000 liberation war heroes
also exacerbated the country’s econom-
ic problems after the payout inflated the

budget by 55% and a currency meltdown.
A Zimbabwean developmental econo-
mist based in the United Kingdom, Che-
nai Mutambasere said absence of a pub-
lic debt audit left many things unclear. He
pointed out that there was no clarity on the
total percentage of private lending terms
of current borrowing while any concession-
ary arrangements, where the country was
highly indebted, were also unknown.
“There is ambiguity of public debt state-
ments - too many smokes and mirrors con-
cerning private debt. There is no indica-
tion of total outstanding amount, but only
disbursements made. Are we confusing
debt relationship terms for example exter-
nal – On lent loans? What does this relate
to; what is the downstream relationship in
terms of on lent loans; does government
apply any interest on on-lent loans? There
is also an unclear relationship with State
Owned Enterprises whom the government
borrows on behalf of, what is the extent of
autonomy, if revenue generating, why are
their loans serviced by tax payer and not
directly?” she said.
“Avoid putting the horse before the cart-