$2 bil­lion ex­ter­nal debt chokes State en­ter­prises

Chronicle (Zimbabwe) - - Business Chronicle - Oliver Kazunga

STATE en­ter­prises in Zim­babwe have ac­cu­mu­lated ex­ter­nal debt amount­ing to $2 bil­lion as at the end of June 2016 and this has in­creased Gov­ern­ment ar­rears by $1,75 bil­lion, Trea­sury has said.

Eco­nomic ex­perts have ad­vised the Gov­ern­ment to has­ten the paras­tatal re­form process to im­prove op­er­a­tional ef­fi­ciency and at­tract in­vest­ment.

Re­cently, Fi­nance and Eco­nomic De­vel­op­ment Min­is­ter Pa­trick Chi­na­masa re­vealed that pub­lic en­ter­prises were fail­ing to ser­vice their debts re­sult­ing in the Gov­ern­ment call­ing up all the guar­an­tees of $2 bil­lion.

“To­tal ex­ter­nal debt of Pub­lic En­ter­prises that has been guar­an­teed by the Gov­ern­ment is es­ti­mated at $2 bil­lion as at end June 2016. Pub­lic En­ter­prises are fail­ing to ser­vice their debt and all the guar­an­tees of $2 bil­lion have been called up,” said the min­is­ter while pre­sent­ing his mid-term fis­cal pol­icy re­view state­ment.

“This has con­trib­uted to an in­crease of Gov­ern­ment ar­rears by $1.75 bil­lion (25 per­cent of to­tal ex­ter­nal debt), fur­ther wors­en­ing the coun­try’s low credit wor­thi­ness.”

Min­is­ter Chi­na­masa ad­mit­ted the debt sit­u­a­tion calls for a re­assess­ment of the moral haz­ard im­pli­ca­tions on guar­an­tees is­sued by the Gov­ern­ment as well as on-lend­ing to pub­lic in­sti­tu­tions.

He said it was im­per­a­tive to strengthen pub­lic debt man­age­ment by in­creas­ing over­sight on con­tin­gent li­a­bil­i­ties of pub­lic en­ti­ties.

“Ef­fec­tive mon­i­tor­ing of guar­an­tees and on-lend­ing will help in en­hanc­ing safe­guards against the risk of moral haz­ard,” said the min­is­ter.

As part of the ac­cel­er­ated im­ple­men­ta­tion of ZimAs­set, the Gov­ern­ment is ad­vanc­ing State En­ter­prises re­form to elim­i­nate their high de­pen­dency on the fis­cus.

This, among oth­ers, said Chi­na­masa, was crowd­ing out cap­i­tal re­quire­ments for pri­vate sec­tor and com­mu­nity de­vel­op­ment.

“Out of 97 State en­ter­prises and paras­tatals (SEPs), the Gov­ern­ment ini­tially pri­ori­tised 10 State en­ter­prises, which if suc­cess­fully turned around will bring re­lief on the fis­cus and sup­port eco­nomic growth and de­vel­op­ment.

“How­ever, given the ur­gency of coun­ter­ing risks from State en­ter­prises, the Gov­ern­ment has iden­ti­fied ad­di­tional 10 SEPs for turn­around.

“Dif­fer­ent fund­ing ar­range­ments are un­der con­sid­er­a­tion and a roadmap for their trans­for­ma­tion is be­ing de­vel­oped,” he said.

In view of this eco­nomic an­a­lyst Dr Dav­i­son Gomo yes­ter­day said Zim­babwe needs to com­pletely re-think the coun­try’s eco­nomic model.

“At the mo­ment the econ­omy is not do­ing very well. The truth is that fund­ing of paras­tatals is nec­es­sary be­cause they play a fun­da­men­tal role in eco­nomic de­vel­op­ment.

“Even if in­vestors are to pour in $600 mil­lion say in the Na­tional Rail­ways of Zim­babwe for in­fra­struc­ture re­ha­bil­i­ta­tion that will not help in turn­ing around the paras­tatal for as long as there is no eco­nomic ac­tiv­ity in the coun­try,” he said.

“I do not be­lieve that paras­tatals are in­ef­fi­cient and that they drain the fis­cus; that’s not true. In­stead, we should re-think about how we struc­ture them while at the same time try­ing to make all the sec­tors of the econ­omy work. At the mo­ment, we have a vir­tu­ally sickly econ­omy and what is it that NRZ can do in such an econ­omy.”

Min­is­ter Chi­na­masa noted that track­ing per­for­mance of SEPs was highly crit­i­cal as the pub­lic sec­tor was un­der in­tense pres­sure to im­prove pub­lic en­ter­prises’ op­er­a­tions.

“The ob­jec­tive is also to see SEPs timely re­spond­ing to ac­count­abil­ity re­quire­ments, im­prov­ing ser­vice de­liv­ery, and re­duc­ing costs, while max­imis­ing out­put and in­creas­ing pro­duc­tiv­ity.

“This per­for­mance mon­i­tor­ing and eval­u­a­tion process makes use of fi­nan­cial and op­er­a­tional per­for­mance in­di­ca­tors through pe­ri­odic anal­y­sis and com­par­isons,” he said. — @okazunga

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