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NewsDay

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Zimbabwe gets tough on borrowings

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TREASURY will have the final signature on external loan contraction by parastatals and local authorities as part of far- reaching reforms

TREASURY will have the final signature on external loan contraction by parastatals and local authorities as part of far- reaching reforms to curb the recurrence of borrowings not meant for key projects.

NDAMU SANDU CHIEF BUSINESS REPORTER

The new measures will also result in the setting up of the Zimbabwe Debt Management Office (ZDMO) to maintain a comprehensive and credible computerised database of all public and publicly guaranteed external debt.

It will also formulate debt management policy and strategy and advise the minister on all debt-management issues, Finance and Economic Development minister Patrick Chinamasa said yesterday.

Last week, Cabinet approved the principles of a Bill to set up ZDMO.

Chinamasa said the measures to bar local authorities and parastatals from contracting debt without approval from Treasury was meant to ensure that money borrowed was channelled towards infrastructure and the productive sector projects.

“Any borrowing by local authorities must first get approval from the line ministry which then approaches the ministry of Finance for authority to borrow,” Chinamasa said.

According to the new measure, the Minister of Finance, after consultation with the minister responsible for local council, shall “prescribe an annual borrowing limit for each local council based on its capacity to repay and such other considerations as the minister of Finance and Economic Development may determine”.

“All external borrowings of a local authority shall be subject to the prior approval of the relevant minister and the Minister for Finance and Economic Development,” the measures said.

“All external borrowings of a public enterprise shall be subject to the prior approval of the relevant minister and the Minister of Finance and Economic Development.”

Chinamasa said ZDMO, to be headed by the secretary of Finance and Economic Development, would submit periodic reports to Parliament on borrowings incurred.

It will also be audited by the Comptroller and Auditor-General.

Zimbabwe is reeling from a total domestic and external debt of $9,9 billion which it is failing to service, thus militating against efforts to get fresh lines of credit needed to reboot the economy.

Of the total debt, $6,9 billion is public and publicly guaranteed, meaning that it had been secured with government guarantees.

Chinamasa said Zimbabwe was in discussions with the country’s creditors on the way forward to resolve the debt issue.

“What the outcome will be, we don’t know. We cannot force our wishes on our creditors. We are engaging them on what measures we can take and what decisions they can make to alleviate our debt situation,” he said.

“It’s a long, a very long road, maybe two to three years down the line. As we crawl our way out of this situation to be of good standing with the China Eximbank, India Exim Bank, African Development Bank, European Investment Bank, World Bank and the International Monetary Fund, among others, we need to have policies that show that we are building capacity for economic development.”

Chinamasa said he had received communication from the IMF “congratulating us on the little that we have done in the financial sector” and proposed reforms in the mining industry.

“The train is moving in the right direction,” he said, imploring government officials to speak with one voice on policy matters in apparent reference to the interpretation of the indigenisation and empowerment legislation.