×
NewsDay

AMH is an independent media house free from political ties or outside influence. We have four newspapers: The Zimbabwe Independent, a business weekly published every Friday, The Standard, a weekly published every Sunday, and Southern and NewsDay, our daily newspapers. Each has an online edition.

Put in place debt management strategy’

Business
Government should come up with a debt management strategy that will ensure the country does not plunge into huge liabilities again, as efforts are made to re-engage with the international lenders, the Zimbabwe Coalition on Debt and Development (Zimcodd) has said.

Government should come up with a debt management strategy that will ensure the country does not plunge into huge liabilities again, as efforts are made to re-engage with the international lenders, the Zimbabwe Coalition on Debt and Development (Zimcodd) has said.

BY MTHANDAZO NYONI zicodd

The country owes foreign creditors about $10 billion and its plan to clear $1,8 billion arrears to three preferred creditors International Monetary Fund (IMF), African Development Bank (AfDB) and the World Bank — was approved recently in Lima, Peru.

In its position paper on Zimbabwe’s arrears clearance strategy yesterday, Zimcodd said the current debt strategy’s aim was to clear arrears to unlock new lines of credit, but the pitfall of this approach was that it overlooks sustainability, as manifested by the government’s endeavour to use bridging loans only to access international financial institutions (IFIs) loans to repay the same loans.

“While new loans are justified as necessary in order to finance infrastructure reconstruction and improving the quality of life of ordinary Zimbabweans, this is unlikely to be achieved without a clear debt sustainability strategy,” the organisation said.

Zimcodd recommended the establishment of transparent and accountable institutions and transparent investment agreements, which could guarantee efficient utilisation of resources and revenue.

“This will reduce both illicit and licit financial flows in Zimbabwe, thereby, allowing the country to deal with its debt question effectively,” it said.

Zimcodd said the government must stop rushing into borrowing new money without being clear what the role of foreign lending was. It said there was need for prior examination of the appropriateness before signing for new loans by Parliament.

“If there are any conditions on the cancellation of the debts, these should not infringe on social and economic development. For example, the recommendation by the IMF for the government to reduce the size of the public service’s workforce is not palatable. This has negative impacts on the people as the poverty levels will increase,” the organisation said.

“There should be responsible lending from the creditors. There is need for the creditors to give grants as primary financial assistance to Zimbabwe at the moment instead of loans with conditions. Lenders should first determine whether the country has the absorptive capacity, the ability to pay and the social and economic impact of the loans before they give the loans.”

Zimcodd said strategies for debt management should be located within a broader developmental vision of the country that balances growth, obligations to repay and human development.

“Sound debt management entails keeping the cost of repayment minimal, while the very debt is employed to build repayment capacity and develop domestic funding mechanisms. Building internal and citizens-based revenue capacity is crucial since it enhances the link between taxation, State building and democratisation.”

Zimcodd said the government should commission an official debt audit to establish how much is owed, the purpose and conditions under which loans were given, disbursement methods, whether objectives were met, charges other than interest and benefits, and if any benefits accrued to citizens.

Zimbabwe requires long-term financing to help reboot the economy, but is hamstrung by the external debts which have locked the flow of international capital.