daniel chigunwe
Nelson Gahadza
Government is encouraged by progress and milestones achieved so far on reforms under the arrear’s clearance and debt resolution process, but experts believe the country may have missed a realistic chance to resolve its debt conundrum through a lack of real commitment to reform.
In a recent statement, the Government said Zimbabwe’s total public debt is estimated at US$21 billion as of June 2024, with external debt at US$12.3 billion, while domestic debt amounts to US$8.7 billion.
It said external debt is owed to bilateral and multilateral creditors, with the latter accounting for US$3.1 billion. Out of this multilateral debt, $681 million is owed to the African Development Bank, $1.5 billion to the World Bank and $427 million to the European Investment Bank.
According to the statement, implementation of the reforms is being spearheaded by a sector working group’s (SWG) tasked with focusing discussions on the Government’s implementation of reforms under the three key strategic pillars.
These include economic growth and stability reforms, governance reforms and land tenure reforms, compensation for former farm owners (FFOs) and the resolution of bilateral investment protection and promotion agreements (BIPPAs).
Former State Enterprises and Parastatals Minister during the Government of the National Unit and lecturer at Lupane University, Gorden Moyo, told Business Weekly that Zimbabwe is a debt economy and its debt levels are unsustainably high.
“What makes matters worse is the stalled Structured Dialogue Platform, whose champion is the outgoing President of the African Development Bank (AfDB), Dr Adesina.
“Former President Joachim Chissano of Mozambique was supposed to provide political leadership to the dialogue process. This initiative was supposed to offer realistic chances for Zimbabwe to resolve its debt conundrum,” he said.
He added that multilateral and bilateral creditors were willing and ready to help Zimbabwe restructure its sovereign debt, provided the Government on its part addressed the governance issues, including corruption, illicit financial flows and quasi-fiscal operations of the central bank.
“In this context, the debt overhang will remain an albatross on the neck of Zimbabwe’s economy. Token payments will not resolve the debt slavery in Zimbabwe.
“Only a holistic approach such as the one offered by the structured dialogue platform stands a realistic chance of reducing the debt burden and providing resources for education, health and sanitation, among the other essential social expenditures,” said Moyo.
He noted that for the time being, debt pile-up will continue due to penalties, interests, and charges on arrears and the principal amount owed.
In December 2022, the Government established a structured dialogue platform with all creditors and development partners to institutionalise structured dialogue on economic and governance reforms to underpin the arrears clearance and debt resolution process.
The process is being championed by the Bank President, Dr Adesina, and supported by the High-Level Facilitator, former President of the Republic of Mozambique, Chissano.
According to the statement, the Government reiterated that it takes full ownership and is committed to the implementation of its reform agenda under the debt resolution process.
The Government believes the process is a crucial step in enabling it to address the longstanding debt overhang challenge that remains a significant obstacle to the country’s development efforts.
Economist, Eddie Cross, said Zimbabwe’s debt is actually quite modest in relation to its economy.
He said China and Japan both have a national debt that is 250 percent of their GDP and the USA is about 120 percent.
“They do not pay back their debt; they service it and borrow again. Our problem is that we are in default and need to restructure our debt so that we can service the liability on time and in full. If we do that, we could do what the majors do and simply recycle our debt,” he said.
Cross said the decision to take the debt issue to committees led jointly by the international community and the Government was exactly what was needed, and it has made progress, and President Chissano has played a key role.
In his opinion, he believes token payments are not necessary, but there is a need for the adoption of an overall plan so that when we start paying, it is within an agreed programme that is sustainable and affordable for the economy.
Investment analyst, Malone Gwadu, told Business Weekly the debt overhang continues to be an albatross for the economic endeavours in many ways.
“We need to reduce our debt to acceptable levels, which can attract investment, and be able to achieve debt restructuring, which will be able to unlock further funding for our huge funding needs as a country,” he said.
He added that securitisation of the country’s abundant and yet to be discovered minerals could be a model for consideration, although it’s quite difficult as we will be negotiating with limited knowledge due to the need to explore the resources. “Hence vulnerability to serious short-changing and transfer pricing risk,” he said.
Vince Musewe, an economist, said with regard to debt management, it is clear that we cannot service all the debts, and they will continue to be an albatross on our neck.
The Government in the statement indicated that development partners, represented by European Union Ambassador Jobst Von Kirchman, Switzerland’s Ambassador Stephanie Rey, UNDP Resident Representative Dr Ayodele Odusola, and World Bank Senior Country Economist Victor Steenbergen, acknowledged the milestones achieved by the government under the three pillars guiding the debt resolution process.
“They offered their support to Zimbabwe and stressed the importance of maintaining dialogue and strengthening the macroeconomic framework, particularly in implementing the SMP, accelerating the implementation of the agreed reforms, and continuing collaborative efforts to ensure the success of the debt process,” reads the statement.
However, America remains a major challenge as it has insisted will not support Zimbabwe as long as Zimbabwe Democracy and Economic Recovery Act remained in place and enforceable. Among other issues, the law entails American citizens in positions of influence in some world bodies should not vote in support of Zimbabwe.
Bongani Ndlovu