Zimbabwe’s debt strategy meaningless without reforms: ZIMCODD
There are fears that Zimbabwe’s debt strategy would be meaningless if authorities fail to fully implement political and economic reforms that are expected by creditors and the international community, the Zimbabwe Coalition on Debt and Development (ZIMCODD) has said.
According to ZIMCODD, a social and economic justice watchdog, the success of the debt strategy is highly hinged on the full implementation of political and economic reforms, noting that the International Monetary Fund (IMF) in its conclusion of the 2021 Staff Monitored Programme, underlined the government’s lack of progress in implementing these reforms as per the expectations of creditors and the international community.
ZIMCODD made these observations after the latest Arrears Clearance, Debt Resolution, and Restructuring Strategy released by the Public Debt Management Office (PDMO) showed Zimbabwe’s external Public and Publicly Guaranteed (PPG) debt stands at US$14.4 billion as of December 2021.
Arrears of this debt alone constitute about 45.8 percent (US$6.6 billion) of the total.
The government, which has admitted Zimbabwe is in debt distress, proposed two options for its debt strategy, that is joining the Heavily Indebted Poor Country (HIPC) Initiative and or undertaking a non-HIPC Initiative route involving debt restructuring and arrears clearance via bridge financing and own resources.
The HIPC Initiative was introduced by the International Monetary Fund (IMF) and World Bank in 1996, to make sure that the poorest countries in the world are not overwhelmed by unmanageable or unsustainable debt burdens.
ZIMCODD noted that the HIPC initiative has evolved with time as it was broadened in 1999 and later supplemented by the Multilateral Debt Relief Initiative in 2005 where a HIPC country can receive 100 percent debt relief on eligible debts to help accelerate progress toward the attainment of the United Nations (Sustainable Development Goals (SDGs).
“While the two options being considered in Harare’s debt strategy are sufficient to bring a lasting solution to the debt crisis, the strategy has also laid bare the effects of toxic politics on economic progression,” said the watchdog.
“During the period of the Government of National Unity in 2009 to 2013, senior bureaucrats and political heavyweights dismissed the Treasury’s proposal to join the HIPC Initiative. At the time, they cited that Zimbabwe was too rich to be considered a poor country. However, as a result of limited options for resolving burgeoning debt a decade later, the same authorities are now seeing great advantages of participating in the HIPC Initiative.”
ZIMCODD said the HIPC Initiative was ideal as it aims to make sure its member countries prioritise social spending, where they commit to inclusive growth anchored on poverty reduction and sustainability.
“This is shown by the HIPC eligibility criterion that a nation must first develop a Poverty Reduction Strategy Paper (PRSP) through a broad-based participatory process. The PRSP would be implemented for at least a year before a participating country is granted maximum debt relief,” ZIMCODD said.
“So, given that International Financial Institutions supporting these poor countries under the HIPC Initiative are continuing to strengthen the links between debt relief, poverty reduction, and social policies, joining HIPC helps Zimbabwe develop a strong social environment, improve public finance management, and natural resource governance.”
However, ZIMCODD expressed worry that the treasury’s push for crucial parastatal reform and privatisation of loss-making State-Owned Enterprises is facing opposition from bigwigs in Government, as has been reported before.
“The Transitional Stabilisation (October 2018-December 2020) and now the National Development Strategy 1 (NDS1) (2021-2025) are loaded with structural and economic reforms which are yet to materialise to date,” said the watchdog organisation.
“In other countries like China, their efficiently run parastatals are contributing at least 40 percent to national output (GDP) annually yet in Zimbabwe they have become the parasites sucking the fiscus.”
The watchdog also scoffed at the Treasury’s rhetoric of fiscal consolidation and budget surpluses since 2019, yet highlighted that the finance ministry was seeking Parliamentary condonation for about ZWL$107 billion in over expenditures incurred by line
ministries in 2019 and 2020.
“In the previous four years (2015-2018), another condonation was granted for combined budget overruns totalling US$10 billion. The continued over expenditures illuminate the inefficiencies of command economics like Command Agriculture, a programme the government is implementing since 2016 but is neither revealing its actual annual cost nor its beneficiaries,” ZIMCODD said, adding it showed a lack of political will to implement necessary fiscal reforms that will lead to an improvement in the management of public resources in Zimbabwe.