MPs take govt to task over US$18bn debt

LEGISLATORS have taken the government to task over the country’s US$18 billion debt, particularly regarding the Paris Club portion, following news of stalled re-engagement talks with the United States and European Union (EU).

Harare had defaulted servicing debts to Paris Club and other creditors for about 15 years until it paid its dues to the International Monetary Fund (IMF)in 2015, hoping to open the floodgates for fresh lines of credit to save a haemorrhaging economy.

Major lenders have, however, demanded that Zimbabwe clears its debts to the World Bank, the African Development Bank, the Paris Club and others before approaching them.

During a Parliamentary question and answer session last week, legislators highlighted the rising debt and questioned the government’s plan, considering the withdrawal of major creditors like the US and EU.

Marondera Central legislator Caston Matewu (CCC) said: “Our debt is reaching a ceiling of US$18 billion. In the view that both the United States and the European Union have all pulled out of the re-engagement talks on Zimbabwe’s debt, what is government's plan on dealing with the debt question given that most of this debt is actually to the Bretton Woods institutions.”

The Bretton Woods system of monetary management established the rules for commercial relations among the United

States, Canada, Western European countries.

Finance, Economic Development and Investment Promotion deputy minister David Mnangagwa, however, said the government remained committed to repaying the debt owed to the Paris Club.

Mnangagwa said the recent pause in discussions with the US did not affect their plan.

“We actually had the inaugural meeting for this year three weeks ago. It is the US that has taken a pause as they wait for the interim assessment, but I would like to separate the discussion of debt clearance and the dialogue platform that is there.

“The US$18 billion consists of debt to the Paris Club which I think is about US$3 billion. We have got some internal debt with various other people.

“So, when it comes to the EU and the US, I would say it is actually a smaller chunk of our debt, plan with the debt is to eventually pay it back as we build capacity.

“The structured dialogue platform is an all-encompassing process that is supposed to include a reform process, re-engagement and other new nuances but really, it does not reduce the debt in any way. There will be no debt forgiveness, there will be no interest forgiveness.”

Mnangagwa said the government would press on with the reengagement process.

“As a sovereign country, we will always make do on our arrears and on our debts and the plan is there. I will refer you to our public debt prospectus which I will share.

“If you look at Zimbabwe’s debt profile, we are nowhere near distress. Our debt is manageable. You will find that while there has been an increase, the Treasury also sealed the debt by the central bank which was in excess of US$3 billion which would have grown on the national balance sheet, but I will say the plan for the debt is to pay it back.

“I am not sure which other measures you want the country to take to deal with the debt apart from paying it back. As the nation grows, as we borrow, we assume more debt and we continue to pay back.”

Mnangagwa said the re-engagement process was part of Zimbabwe’s plans to be a member of the global community.

“We are paying back our debt, it is there in the budget I will get the specific figures of what is being paid back but as to why the debt is increasing, as we pay back, we keep borrowing.

“We are not a static nation, we are a growing nation. As we pay back some of the loans that we have taken, we take on more loans and pay those back. We are growing. I will provide the actual specific figures,” he said.

Zaka South legislator Clemency Chiduwa (Zanu PF) inquired about provisions for token payments towards debt reduction in the 2024 budget.

“I know you have been making payments for the past four or five years. I wanted to find out in the 2024 budget, do you have provision for token payment, the token payments are small payments that they make towards the extinction of the national debt,” Chiduwa said.

Mnangagwa said: “We have been servicing our debts, even token payments, including having made provisions for internal debt by way of Treasury Bills that will be maturing this year, as well as the token of payment for Paris Club. So, we are making payments, they make a certain percentage of our monthly pay-outs. I will get those exact figures.”