adminZimbabwe’s external debt is around US$7 billion and analysts sexpect it to rise to US$8 billion by year-end, due to penalties and arrears.
“In our view, the most feasible way to tackle this would be to go for privatisation of all the loss-making parastatals to make them profitable,” said the MMC report.
“Such a move will reduce these entities’ unnecessary demands on the fiscus, leaving it with room to prioritise other things such as servicing of external debts.
“Another low-hanging fruit would be that of expanding the Government’s revenue base through formalisation of the informal sector.
“This move will actually improve Government collections by not less than 50 percent.”
Zimbabwe has 78 State enterprises, most of them underperforming and a burden to the fiscus as they relied on perennial handouts.
In 2010, Government approved the privatisation of 10 entities but notable progress has been on the sale of Government’s 54 percent stake of Ziscosteel, now NewZimsteel, to Indian firm Essar Global.
There was also progress on the unbundling of the National Oil Company of Zimbabwe into two entities. Government has since come up with a manual that will guide and
speed implementation of privatisation.
The MMC report said Zimbabwe’s debt has resulted in high financing costs, chewing into the incomes of most companies, low capacity utilisation due to working capital constraints, failure to raise funds for retooling, high unemployment and increasing non- performing loans.
Some of the institutions owed by Zimbabwe are the African Development Bank (US$529 million), World Bank (US$1,5 billion), the International Monetary Fund (US$550 million) and the European Investment Bank (US$221 million).
Zimbabwe’s huge debt liability is largely a result of the country’s economic instability over the decade to 2008, which constrained capacity to repay.
Launching the Accelerated Arrears Clearance, Debt and Development Strategy on March 21 this year, Finance Minister Tendai Biti said the external debt was impeding economic recovery as it was blocking capital inflows for economic programmes.
“The cumulative effect of these issues brought about by the unresolved debt has been that a huge risk premium has been attached on Zimbabwe, thereby further compounding the liquidity squeeze,” it said.
“We cannot deal with these infrastructural challenges without funding and assistance from international financial institutions and bilateral partners.
“But the rules of the international community are such that, as long there are arrears, we will not be able to access this funding,” said Minister Biti.
Last year, the AfDB cited the debt overhang as a major stumbling block to Government’s efforts to attract foreign investment.
Online Reporter