Zim debts should be cancelled

CIVIL society organisations say the government should adopt a scientific and objective debt audit as part of measures to have the country’s odious debts cancelled.

Odious debts are defined as arrears incurred by the state which are not for the needs or interest of the state but merely to strengthen the state’s despotic power as well as to repress the population that fights against despotism.

Janet Zhou, the Zimbabwe Coalition on Debt and Development executive director, said while part of Zimbabwe’s US$8 billion external debt was incurred by the Rhodesian government during the war, the country’s post-independence government went on to incur unjustified debts which did not benefit ordinary citizens.

“From the domestic debt front, we saw a leap from November 2017 of domestic debt from US$4 billion to US$9,5 billion in a period of eight months and there are still questions on what this domestic debt was acquired for,” she said on an online platform last Friday.

However, experts warned that the country has to prove that the lending institutions knew or ought to have known that the funds would not be used in the interest of the people, but solely for the benefit of the ruling regime’s members in their personal capacities.

“It is therefore imperative for the government in Zimbabwe to institute a debt audit. Zimbabwe should not honour any debts that have not been properly audited and proved to be lawful and legitimate,” economic analyst Francis Mukora said.

The latest calls for debt cancellation comes at a time the southern African country is sitting on a sovereign debt time bomb that could trigger at any time due to the ballooning external and domestic debts.

IMF resident representative to Zimbabwe Patrick Imam said the public debt is an issue that has contributed significantly to the economic crisis facing Zimbabwe.

“Seven countries are in debt distress, Eritrea, Zimbabwe, Gambia, Mozambique, Republic of Congo, Sao Tome and Principle and South Sudan. Zimbabwe’s debt is more than 70 percent in interest accruals while only 20 percent is the principal debt.

“As interest payments have been rising, this will divert a larger portion of fiscal revenues going forward away from more urgent spending such as health, education, and infrastructure,” Imam said.

Zimbabwe’s resources are insufficient to finance its vast development agenda. But, its failure to deal with the debt will sow the seeds for more trouble. The events that led to spike in borrowing started in the 80s from a public spending spree by the Zimbabwe government to stimulate the economy through rapid finance developmental expenditure. But, for the past 20 years Zimbabwe neglected to service its debts.

This has constrained the government from accessing foreign loans except from a few creditors because there are no guarantees.

The accumulation of external payment arrears resulted in the IMF declaring Zimbabwe ineligible for the general resources account of the IMF financing window.

Other international funders such as the World Bank, the African Development Bank and traditional creditors from the Paris Club and others also suspended disbursements of existing loan facilities and also declared the country ineligible for new loans.

Meanwhile, Zimbabwe Congress of Trade Unions president Peter Mutasa said the country is a “failed State” due to high poverty levels, decaying infrastructure caused mostly by poor governance and deep-seated corruption, which has seen the country losing billions of dollars to a few powerful individuals.

“In 2013, the country’s external debt was US$5,8 billion and now it is US$8 billion and it shows that our priorities have been very wrong as we have been spending on wrong things like the war in the Democratic Republic of Congo (DRC) and yet our poverty levels are at 74 percent and 34 percent of people are in abject poverty and the infrastructure is decaying,” he said on the online platform.