‘Debt assumption fuelling corruption’

From A2

“ e assumption of debt, from parastatals, by the government means that the debt that the parastatals incurred (whether for the good of the economy or out of unsound corporate governance processes) will now be shouldered by the ordinary citizens,” Stevenson Dhlamini, an applied economics lecturer at the National University of Science and Technology, said.

“If this process of debt assumption is undertaken without a thorough forensic audit to determine how the debts were acquired, then it will further fuel corruption and gross misallocation of resources amongst stateowned enterprises,” he added.

Dhlamini said forensic audits will ensure that the government does not assume any odious debts in the process and combat corruption.

“Furthermore, the assumption of debts by government is worsening domestic debt distress, which chases away potential investors and international financiers,” he said.

Analysts also pointed out that assuming parastatal debts and doling out funds to non-performing entities would burden an already over-taxed citizenry.

ey called for the restructuring of most parastatals, giving top managers’ performance-based contracts while getting rid of poor performers.

Analysts added that the government delays to conduct forensic audits on debts acquired by parastatals showed that those running the firms were politically connected.

Government has not disclosed debtors owed US$1,35 billion to RBZ.

e debt has been passed on to the ordinary taxpayer.

In its February 2022 economic report, the Zimbabwe coalition on Debt and Development (Zimcodd) said as of September 2021, public and publicly guaranteed (PPG) debt was recorded at US$13,7 billion.

Of this debt, external debt constituted US$13,2 billion while domestic debt was US$532 million.

is public debt constitutes about 85% of the country’s gross domestic product (GDP), way above the 70% threshold.

Accounting for the January 2022 assumption of RBZ debt, Zimcodd said total public debt will expand to US$14,2 billion.

e RBZ debt alone, totalling US$5,4 billion now constitutes over 30% of total debt stock.

“Generally, a debt-GDP ratio shows a country’s capacity to repay its debts, with a rising ratio indicating that debt is growing faster than national income.

“As such, the ballooning Zimbabwe debt is a cause for concern, especially under the context of the Covid-19 pandemic, fragile domestic election season, worsening global geopolitics between nuclear superpowers, and a mounting global inflation wave.

“ erefore, there is a need to undertake an independent public debt audit that will inform the scale and nature of the country's debts, which are often not transparently publicised.

“An audit will also become a building block to popularise discussion about the legitimacy of certain debts and whether they should be repaid,” Zimcodd added.

Zimbabwe needed to revamp its public debt management, a process of establishing and executing a strategy to ensure that the government's financing needs, and its payment obligations are met at the lowest possible cost and consistent with a prudent degree of risk, interest rate risk, currency risk as well other risks, experts said.