Call for Zimbabwes debt cancellation

ZIMCODD is a coalition of organizations in Zimbabwe to facilitate citizens involvement in public policy making and to raise levels of economic literacy to promote socio-economic justice in the country. Zimbabwes debt burden is one of the coalitions key programme areas.

According to ZIMCODD, Zimbabwe has an unsustainably high level of external debt, the bulk of which is owed to multilateral funding agencies. Most of Zimbabwes external debt stock is in interest owed in arrears to the World Bank, the IMF, and the African Development Bank. The countrys indebtedness…has continued to increase largely due to the recapitalization of interest whilst arrears are escalating due to continued defaults on principal amounts falling due.

Analysts assert that if the debt is not reduced in a consistent and systematic fashion, it could balloon to US$ 7 billion by 2011.

New credit lines could also add to this figure significantly. The issue of the potential illegitimacy of some of Zimbabwes debt was also raised given the failed policy advice of the multilaterals to which a significant portion of the debt is owed.

Moreover, the loan contraction process in Zimbabwe gives almost exclusive and sweeping discretionary powers in the contraction of new loans to the President and the Minister of Finance. This needs to be opened up to citizen involvement and scrutiny.

In this context, ZIMCODD said it was calling for a comprehensive debt audit which will establish among other things, the amounts borrowed, interests accrued, amounts repaid, conditions of lending, reasons for borrowing, use of funds borrowed, loan beneficiaries, historical and ecological aspects of the debt.

The findings of the debt audit would form the basis of the case for either repudiation or cancellation. The debt audit will help unlock resources currently earmarked for debt servicing and redirect them towards health service delivery, education, water and sanitation among other social services which are in dire state.

Minister of Finance Tendai Biti said the debt burden will place a server constrains on the economic recovery prospects if unmonitored, especially considering that the country requires over US$8,4 billion to revitalise the economy.

The resultant debt overhang will result in furthering the downturn trajectory in foreign direct investments as investors fear implicit taxes on return on investments to meet the countrys external debt obligations, thereby diminishing prospects for recovery and growth, Biti said.

Biti said government in conjunction with a number of developmental partners who include amongst others, the African Development Bank Group (ADB) and the macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) will from July this year, undertake a comprehensive assessment of the current and future debt obligations with a view to formulate an optimal and sustainable debt strategy consistent with the broader macroeconomic policy objectives of the countrys national development strategy.

In the short term government is engaging the International Monetary Fund (IMF), World Bank and the African Development Bank with respect to accessing technical assistance support on finding options on restructuring Zimbabwes external debt, said Biti.

Biti said government was also in the process of validating its external debts with its creditors, which should feed into a debt sustainable framework.

Biti said the countrys economic indicators reflect that the country was a low income country and subsequently qualifies for the Highly Indebted Poor Countries (HIPC) Initiative at the HIPC decision points.

Upon reclassification to a low income country, Zimbabwe becomes eligible to benefit from exceptional arrears clearance support from the World Bank and ADB.

In this regard, Biti said government was in the process of capacitating the Central Statistical Office with the assistance of developmental partners to ensure that it produces current national income and social statistics that are up to date which will form the basis of the reclassification.

Biti said the country revenue collections had been steadily rising from January collections of US$4,7 million to US$28,7 in February. In March revenue collected rose to US$41,7 million to US$51,6 in April before rising to US$66,8 million on May.