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Oliver Kazunga, Senior Business Reporter
STATE enterprises in Zimbabwe have accumulated external debt amounting to $2 billion as at the end of June 2016 and this has increased Government arrears by $1,75 billion, Treasury has said.
Economic experts have advised the Government to hasten the parastatal reform process to improve operational efficiency and attract investment.
Recently, Finance and Economic Development Minister Patrick Chinamasa revealed that public enterprises were failing to service their debts resulting in the Government calling up all the guarantees of $2 billion.
“Total external debt of Public Enterprises that has been guaranteed by the Government is estimated at $2 billion as at end June 2016. Public Enterprises are failing to service their debt and all the guarantees of $2 billion have been called up,” said the minister while presenting his mid-term fiscal policy review statement.
“This has contributed to an increase of Government arrears by $1.75 billion (25 percent of total external debt), further worsening the country’s low credit worthiness.”
Minister Chinamasa admitted the debt situation calls for a reassessment of the moral hazard implications on guarantees issued by the Government as well as on-lending to public institutions.
He said it was imperative to strengthen public debt management by increasing oversight on contingent liabilities of public entities.
“Effective monitoring of guarantees and on-lending will help in enhancing safeguards against the risk of moral hazard,” said the minister.
As part of the accelerated implementation of Zim-Asset, the Government is advancing State Enterprises reform to eliminate their high dependency on the fiscus.
This, among others, said Chinamasa, was crowding out capital requirements for private sector and community development.
“Out of 97 State enterprises and parastatals (SEPs), the Government initially prioritised 10 State enterprises, which if successfully turned around will bring relief on the fiscus and support economic growth and development.
“However, given the urgency of countering risks from State enterprises, the Government has identified additional 10 SEPs for turnaround.
“Different funding arrangements are under consideration and a roadmap for their transformation is being developed,” he said.
In view of this economic analyst Dr Davison Gomo yesterday said Zimbabwe needs to completely re-think the country’s economic model.
“At the moment the economy is not doing very well. The truth is that funding of parastatals is necessary because they play a fundamental role in economic development.
“Even if investors are to pour in $600 million say in the National Railways of Zimbabwe for infrastructure rehabilitation that will not help in turning around the parastatal for as long as there is no economic activity in the country,” he said.
“I do not believe that parastatals are inefficient and that they drain the fiscus; that’s not true. Instead, we should re-think about how we structure them while at the same time trying to make all the sectors of the economy work. At the moment, we have a virtually sickly economy and what is it that NRZ can do in such an economy.”
Minister Chinamasa noted that tracking performance of SEPs was highly critical as the public sector was under intense pressure to improve public enterprises’ operations.
“The objective is also to see SEPs timely responding to accountability requirements, improving service delivery, and reducing costs, while maximising output and increasing productivity.
“This performance monitoring and evaluation process makes use of financial and operational performance indicators through periodic analysis and comparisons,” he said. — @okazunga
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