Clifford Chitupa Mashiri, 3rd July 2012.
Zimbabwe’s ever growing debt problem, if left unresolved soon, is arguably a ticking time bomb that could trigger civil strife and instability in the not so distant future.
While RBZ Governor Gideon Gono commented in May that Zimbabwe’s external debt overhang estimated at over US$8 billion “has become a serious developmental constraint for the economy since the turn of the century,” there is no agreement on solutions.
How much debt Zimbabwe owes is unclear because no reconciliation of owed amounts has yet been made with creditors. According to the Jubilee Debt Campaign, the IMF and the World Bank estimate the country’s external debt to be around 120 percent of national income.
That tallies with a comment by deputy premier Arthur Mutambara in July last year that Zimbabwe “is practically broke” with the national debt now outstripping the country’s gross domestic product (GDP).
“If you owe someone US$7 billion and your GDP is US$7 billion then you do not have any money,” said the robotics professor before adding, “We are heavily borrowed and we do not have a GDP to talk about.”
Anyone who has been following events in both developing and developed countries including the Eurozone would be concerned about the implications of Zimbabwe’s debt problem.
One surest thing about loans is that the creditors including Mugabe’s “all weather friend” China will demand settlement one way or another especially for that US$200 million on which Zimbabwe has reportedly defaulted.
Another matter of concern is the government’s resort to utilising IMF’s US$100 million Special Drawing Rights (SDRs) for elections which Zanu-pf hardliners want soon as if the country is in a state of emergency.
One of the criticisms of the IMF’s Special Drawing Rights is their very low rate of interest, just 1.5 per cent.
It is feared this might induce deficit countries (like Zimbabwe) to use their SDRs in preference to other reserve assets to finance their deficits, according to S. Nirav in “Critical Appraisal of Special Drawing Rights Policy of IMF” (preservearticles.com accessed 02/07/12).
In any case, should we be using emergency reserves for elections when the country’s debt burden is ticking like a time bomb? Although Mugabe expressed his wish to live to 100, he might not be in office then to experience the social and political upheavals.
What is odd about this whole issue is that in April 2011, Zanu-pf turned down an offer by the United Nations to fund and supervise elections, accusing the UN of taking the wrong side in the Ivory Coast conflict.
According to media reports, the UNDP approached Justice Minister Patrick Chinamasa with the offer, but Zanu-pf hardliners rejected it, while party Chairman Simon Khaya Moyo said Zanu-pf would not allow funding of elections by the European Union.
It could be argued that if there was no secret financing of a parallel regime by a foreign tycoon to the tune of US$100 million plus 200 pick up trucks to the CIO in exchange for diamonds, Zimbabwe would be able to fund elections and any major programmes.
However, hopes of financial discipline were dashed when the Zanu-pf leader Robert Mugabe reportedly left on Monday for another ‘private’ visit to Singapore, estimated to cost US$3 million, a big dent on the peppercorn budget as this is possibly his 13th such trip since he started in December 2010.
Before considering options for settling Zimbabwe’s debt problem, it is important to deconstruct what the debts were secured for and why the present and future generations should pay for what are believed to be toxic loans which allegedly funded political oppression and impoverishment.
It is therefore this paper’s position that a debt audit be carried out first if the creditors insist on it being repaid. The Zimbabwe Coalition on Debt and Development deserves support in its advocacy for an audit to expose those dodgy deals involving arms exports and projects which caused human rights abuses and environmental destruction.
Ecuador’s debt audit in 2008 found that a large proportion of the country’s external debt had been contracted illegally or illegitimately. As a result, Ecuador renegotiated its debt, with 65-70 % effectively written off (see jubileedebtcampaign.org.uk, accessed 03/07/12).
For the sake of transparency, no creditor and indeed debtor should be averse to an audit. It’s worth noting that not all western countries resist debt audits. In 2009 Norway pledged to become the first lender to commit to an official audit of the debts it is owed.
Zimbabwe’s coalition government has a choice to make – between complacency and going for a debt audit, without which the country could be sleep-walking into an uncertain and very unstable future.
Clifford Chitupa Mashiri, Political Analyst, London, [email protected]
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