Guest column: John Makamure
The past couple of weeks has witnessed parliamentary committees actively engaging the Ministry of Finance and the Reserve Bank of Zimbabwe on the monetary and fiscal policy measures.
This is critical in order to engender transparency and accountability in financial matters as provided for under sections 298 and 299 of the Constitution.
These sections outline principles of public financial management that have to be adhered to, and the central role that Parliament has to play in the oversight of State revenues and expenditure.
One of the meetings between the Reserve Bank of Zimbabwe governor John Mangudya and the Public Accounts Committee chaired by Tendai Biti, discussed at length the issue of public debt contraction and management.
Given the country’s unsustainable public debt position at the moment, it is not surprising that the committee meeting attracted immense media interest.
Watching video clips of the meeting and reading various Press reports, I came to the conclusion that the journalists and several Members of Parliament (MPs) were not fully conversant with the statutes governing public debt management, in particular the Constitution and the Public Debt Management Act which was passed by Parliament on July 29, 2015 and gazetted into law on September 4 the same year.
The MPs raised concern over government contracting debt without parliamentary approval. They seemed to imply that government had to come to Parliament first for approval before negotiating a loan agreement.
It is my considered view that this is a misinterpretation of the relevant constitutional provisions. Section 300 (1) only empowers Parliament to set limits on borrowings by the State, the public debt and debts and obligations whose payment or repayment is guaranteed by the State.
Section 300(3) requires that within 60 days after the government has concluded a loan agreement or guarantee, the Finance minister must cause its terms to be published in the Government Gazette. So basically, government can contract debt without first seeking the approval of Parliament.
However, the debt must not exceed limits set by Parliament. This is what the committees of Parliament must monitor as part of their oversight role.
The other issue that the MPs must monitor is provided for in section 300 (4). In this section the minister has an obligation to, at least twice a year, report to Parliament on the performance of loans raised and guaranteed by the State.
The powers of the Finance minister to borrow are elaborated in the Public Debt Management Act. It is the President who authorises the minister to borrow in accordance with the limits set by Parliament.
The limit may not result in the total outstanding public and publicly-guaranteed debt as a ratio of the gross domestic product at current market prices exceeding 70% at the end of any fiscal year.
The limits can be exceeded provided the minister obtains a resolution of the National Assembly to do so under one or more of the following conditions:
Occurrence of natural disasters or other emergencies requiring exceptional expenditure;
Where a large investment project in the public sector is deemed by Cabinet to be timely and prudential; and
In case of a general economic slow-down requiring fiscal and monetary stimulus.
Section 11 of the Public Debt Management Act says the External and Domestic Debt Management Committee shall, for each financial year, set forth the recommended maximum amount of new government net borrowing and government guarantees which may be undertaken throughout the year, and the minister shall take into account the committee’s recommendations when exercising his or her authority.
The same section is categorical that “subject to section 300 of the Constitution, the minister shall have sole authority to borrow money on behalf of government by concluding loan agreements, issuing government securities, or entering into suppliers’ credit agreements and to issue government guarantees, in Zimbabwe and in both local and foreign currencies, provided that the minister is satisfied it is in the public interest to do so, and in order to maintain the public debt at sustainable levels, and review or revoke any unutilised authorisations”.
And local authorities do not have the independence to borrow wily-nilly. Section 22 says the Minister of Finance shall, after consultation with the Local Government minister, prescribe an annual borrowing limit for each local authority based on its capacity to repay, and such other considerations as the minister may determine.
A local authority intending to borrow above the prescribed threshold shall, upon obtaining a prior resolution of the council, board or other governing body of the local authority to that effect, obtain prior approval from the Minister of Finance through the Minister of Local Government to do so.
A public entity may borrow funds within Zimbabwe up to such a limit as the Finance minister may determine after consultation with the minister responsible for the public entity concerned.
A local authority or public entity shall submit to the Public Debt Management Office a record of its borrowings no later than 10 working days from the date of signing of loan agreement or obtaining an overdraft, as the case maybe, and shall submit monthly, quarterly and annually to the office data on its total outstanding debt.
So the work of the Public Debt Management Office must be of particular interest to the MPs if they are to be effective in overseeing public debt contraction and use of the loans.
The office prepares all the monthly, quarterly and annual reports on public debt which are used by the minister to report to Parliament.
The reports must be laid before the National Assembly at least bi-annually by the minister within 60 days of the end of the period concerned.
John Makamure is the executive director of the Southern African Parliamentary Support Trust. He writes in his personal capacity.