‘Zim is in debt distress’

THE African Forum and Network on Debt and Development (Afrodad), in partnership with the Zimbabwe Coalition on Debt and Development (Zimcodd) recently held its 4th edition of the Annual Multi-stakeholder Debt Conference in Bulawayo.

The conference, which brought together government, political, technical and civic leaders, sought to mobilise and strengthen a concerted African approach to address the current debt crisis.

As Zimbabwe continues to fight debt stress, University of Zimbabwe senior lecturer in the department of economics, Phineas Kadenge (PK) who spoke to senior business reporter Melody Chikono (ND) on the sidelines of the conference, said government’s huge appetite for assuming parastatal debts was worsening the situation

ND: What is your comment on the Zimbabwe’s debt situation?

PK: Zimbabwe is in a situation of debt distress and what it needs to do is to restructure its debt in the sense of looking for other creditors who can assist by extending debt to us. But before they do that, they need to independently assess the extent of our indebtedness as a country, in which case they need details of all the loans that we owe. It becomes difficult when we have debts with countries that we call non-Paris club members such as China, Belarus and India. In their loans, they have non-disclosure clauses. Those who want to independently disclose our indebtedness cannot do so because they cannot get some details that they require.

ND: Zimbabwe has been working on a debt restructuring exercises. What is the impact of these nondisclosure agreements on debt restructuring exercise?

PK:

It means it’s very difficult to get new creditors because they won’t have the comfort to extent loans to us when they are not sure about the extent of our indebtedness. And also, it means Zimbabwe continues to access expensive loans because advances from non- Paris members are not at concessional interest rates. Because of Zimbabwe’s arrears it cannot access the traditional loans from institutions like the World Bank, including what is called the International Development Associations where countries can access loans at low interest rates. When you are in arrears it means you can only access debt at very high interests. That is why we are in this situation.

ND: Are there any legal gaps in this debt situation?

PK:

The whole idea of non-disclosure clauses means there are some aspects of agreements that the government is not comfortable with the public knowing the details of the terms. Why would you ask for nondisclosure if you are comfortable with the term associated with the loans if there was prior debt contraction requirement for government to take the loan proposals to Parliament for scrutiny so that they give prior approval before the debt is contracted. But it would appear there is this a gap. I am not too sure if it’s a legal gap. But our Finance ministry is able to go ahead and commit the country to a debt at these very unfavourable conditions without Parliament stopping them from doing so. Hence, what was arising from the discussions there that if there could be enforcement of the requirement that before loans are contracted apart from that internal assessment process, there was an internal loans committee. If the ministry would be required to also presents to Parliament the debt it intends to contract and the conditions, I think it would make it less possible for unfavourable conditions to be part of the debt contracture.

ND: AFDB president was appointed as the country’s debt champion. In relation to these non-disclosure loan terms, how do you see him succeeding in his quest?

PK:

His chances are very slim. I was kind of surprised because wherever he goes as our champion he will be asked to disclose the extent of our indebtedness, which he cannot do adequately without accessing the information which is covered by nondisclose closes. So I think it lessens his chances of succeeding. Actually, I think it is a very difficult tack to be a debt champion in a country like Zimbabwe. Starting from the fact the figures themselves not only on debt, but even gross domestic product (GDP). When we talk of debt to GDP ratio which GDP are we talking about? We seem not to know the figures relating to GDP and I think there is problem, but of course there is a consensus that the debt we have accumulated is unsustainable. The issue of nondisclosure makes it very restructure the debt.

ND: How is it related to the concept of hidden debt?

PK: We have resource-based where we are incurring debt which will be repaid in future including the creditors being given future amount of gold platinum lithium etc, it becomes very difficult to understate the except of indebtedness which is in the form of actual products that you have to use in you repayments.

ND: You touched on the issues of debt and DGP, why is it like this?

PK: What we are saying is that the debt and GDP figures are contacted in the sense that they are different figures that re being suggested. The official debt figure for Zimbabwe is put at US$13,2 billion, the International Monetary Fund (IMF) says it’s around US$17 billion dollars and the civil society organisation reckons that it is around US$19 billion. When we put this against the figure for GDP which is also not very clear, it becomes very difficult to come up with relation that can generally be accepted. Because for the ratio, we are talking about the debt divided by the GDP but when there different GDP figures, it means we can comes up with different ratios, that is the problem.

ND: What is your comment on reengagement in relation to these debt issues?

PK: We are talking about mending relationships with those who we are having disagreements with. Zimbabwe needs to re-engage with America regarding Zimbabwe Democracy and Economic Recovery Acts, we are also having to re-engage with the United Kingdom and other European countries in relation to the restrictive measures. We are saying the imposition of those restrictions were as a result of their unhappiness with what they considered as poor human rights , violation of property rights and so on . But when you look at the situation , how can you reengage with the EU when you now have the Chitungwiza Citizens Coalition for Change activists and their MP in remand prison? To open up to these traditional sources of debt through re-engagement would require us to address issues that led to the imposition being put in place and it appear we are not doing that well. That why we I talked about the Russian Ukraine crisis, we took the side of Russian which is fighting with the waste, which also happens to be countries we want to reengage with . It makes it very difficult.

ND: How can Zimbabwe emerge out of debt distress?

PK:

One of the issues of the issue of reengagement, reforms to do with the implementing prudent fiscal policies which means we are saying we should be reducing our indebtedness through fiscal policy , this government expenditure and revenue , the new also talking about stopping quasi fiscal activists on the part of reserve bank . These are activities traditionally be done by the fiscal authorities which is treasury not the central banks. It is impact that country undertakes structural or governance reforms for example these news bills before parliament, the PVO bill , amendment of state universities bill, patriotic bill and so on . Those are bills that will make it very difficult for the countries we are having disagreements with to agree loans to us.

ND: How have parastatals contributed to this mess?

PK:

Our government has been assuming debt contracted by state owned enterprises and parastatals. When these organisations fail to repay the debt then government takes over the debt, we are saying this give the wrong incentives to these organisations. That they can they can be misgovernment but at the end of the day the debt will be taken over by tax payers. In a nutshell government’s addiction to assuming debts is worsening the situation.