The Confederation of Zimbabwe Industries, the National Chamber of Commerce, banks and others have all admitted that this monster debt is constraining any prospects of economic growth.
Some have called for us to become a Highly Indebted Poor Country. Others have declared Zimbabwe “too rich to be poor”. Some have even called for the mortgage of mineral resources in return for favourable terms from international lenders.
But how does a national debt crisis affect business and the economy at large? Due to the debt crisis Zimbabwe has a poor credit rating status. This discourages foreign investment, while banks find it difficult to find foreign lines of credit. The situation is worsened by the financial architecture of the banking system, whereby four of the biggest banks are foreign owned. Foreign banks are known to take excessive caution in their lending activities due to the imposed “country risk limits” from parent banks in financial centers like London and Johannesburg.
Zimbabweans across the political and economic spectrum have to sit down as a matter of urgency and try and craft some strategy to get the country out of debt. Under the HIPIC initiative the country can get a reprieve of all its debts, provided it agrees to a prescription of economic policies and road maps.
The fact that part of the debt is odious as it was acquired during the illegal Smith regime is a good argument. From 1975 to 1979 the military expanded its expenditure from 20% to 50% of the national budget.
Since the new government of a free Zimbabwe the economy adopted in excess of $700 million in debts. Assuming this amount was concessionary finance and accumulating an interest rate of say 10% per annum then of the $7.3 billion owed today, approximately 33% is directly attributable to the Smith regime.
We could also seek a debt reprieve through HIPIC and follow that up with request for concessionary finance mortgaged with mineral resources. However the problem comes with attaching a true and fair value to Zimbabwe’s mineral wealth. It should be taken into consideration that some companies like Sino-Zimbabwe have declared Marange diamonds “not enough” to constitute a meaningful capital investment. Besides all the talk about Zimbabwe having loads of methane gas underground, no one has ever attached a value to this. – mawarirer@gmail.com
Post published in: News