Debt situation requires multi-stockholder approach
EXPERTS say the current debt situation burdening Zimbabwe requires a multi-stakeholder approach to solve if the country is to move forward and achieve the upper middle income economy status as espoused in Vision 2030.
Economic activity backtracked due to the outbreak of the Covid -19 pandemic further compounding the economic challenges reducing ability of not only Zimbabwe but the region to service external debts.
Now, the civil society says addressing the debt situation requires efforts by Government, private sector as well as the lenders themselves in coming up with a sustainable debt management plan, that does not weigh heavily on the common citizens.
Transparency International Zimbabwe executive director, Tafadzwa Chikumbu, told journalists that Government should, however, simultaneously implement structural, political and sound macroeconomic policies as part of a sustainable and inclusive debt management strategy.
“It should be a collective responsibility for Parliament, central Government, civil society, international financial institutions and private sector to resolve the debt crisis,” he said at the just ended Media Initiative 2022 for sustainable Debt and Development hosted by the Zimbabwe Coalition on Debt and Development (ZIMCODD) held in the capital. Despite being endowed with vast natural resources, Zimbabwe and the rest of the region are battling high debts. Zimbabwe has been in debt distress since 2000, when the country first defaulted on its external obligations.
As at end September 2021, total debt amounted to US$13,7 billion, comprising of public external debt of US$13,2 billion and domestic debt of US$532 million.
About 77 percent of the external debt is in arrears (interest and penalties).
Of the total public external debt, US$5,4 billion is owed to bilateral creditors, US$2,7 billion to multilateral creditors, US$221 million to creditors under the 2015 Reserve Bank of Zimbabwe (RBZ) Debt Assumption Act and US$4,9 billion is RBZ’s balance sheet external debt. The RBZ balance sheet external debt of US$4,9 billion comprised of US$1,4 billion guaranteed debt, US$72 million non-guaranteed debt and US$3,3 billion of blocked funds.
The outbreak of the Covid-19 pandemic further worsened the situation while other natural disasters such as droughts and other climate related disasters worsening the situation as this created appetite for borrowing to meet food and medical needs.
Extreme climatic events such as flash flooding and drought have caused a reduction in production, worsened the debt overhang and exerted pressure on national budgets.
For instance, in 2019, Zimbabwe together with Mozambique and Malawi were affected by Cyclone Idai that claimed 1300 lives and an estimated US$773 million worth of infrastructure damage.
Housing, agriculture, transport and energy infrastructure were severely damaged in the Eastern Highlands of Zimbabwe resulting in supply chain disruptions. Such events, experts say, force countries to turn to borrowing for the infrastructure restoration programmes.
Chikumbu said domestic resource mobilisation, rationalising of tax incentives, abolishing tax holidays, fiscal discipline as well as aligning the Public Finance Management Act (PFMA) to national constitution are among the strong supporting pillars for debt management