daniel chigunwe
Enacy Mapakame
For the past decade, several African countries, Zimbabwe included, have been battling public debt with the International Monetary Fund (IMF) this week warning that global debt levels are rising at a faster pace than anticipated.
According to the IMF, the world’s two biggest economies, the United States and China, are leading with their debt growing faster than what was previously projected.
The outbreak of the Covid -19 pandemic has added to the woes especially for Africa, as countries like Zimbabwe, Mozambique, Zambia, Sudan, Somalia, Malawi as well as Sao Tome and Principe are in debt distress.
Burundi, Guinea-Bissau, Mauritania, Chad, Comoros, Cameroon, Central African Republic, South Sudan and Togo have debts classified as high.
The challenge was exacerbated by the outbreak of the Covid -19 pandemic as all systems went towards limiting the spread of the pandemic as opposed to debt servicing. Other natural disasters such as droughts and flooding have also increased appetite for borrowing to restore infrastructure damaged by floods as well as for enhancing food security.
In Zimbabwe, total Public and Publicly Guaranteed (PPG) debt is estimated at $2,2 trillion for domestic debt and US$14 billion for external debt (including blocked funds of US$3,1 billion) as at end September 2022 according to Finance and Economic Development Minister Professor Mthuli Ncube.
But Zimbabwe is not alone in this debt trap. The World Bank’s top 10 most externally indebted countries in Africa in 2022 has South Africa topping the list at US$170 billion followed by Egypt, Nigeria and Angola at US$143 billion, US$76 billion and US$67 billion respectively.
Morocco is next with an external debt of US$65 billion followed by Mozambique at US$62 billion. Tunisia is seventh at US$41,6 billion while Kenya and Ethiopia have external debts amounting to US$41 billion and US$30,02 billion respectively.
In most cases, governments have been borrowing heavily to finance budget deficits, which has been widening due to low revenues and high expenditures. This has led to concerns about the ability to service debt, which have proven to have dire consequences for the economy.
Neighbouring Mozambique’s debt burden has been exacerbated by scandals involving hidden loans that were taken out by state-owned companies, which were not disclosed to the public. This led to a suspension of aid and a downturn in the economy.
The Harare Declaration 2021: A New Debt Movement to make Africa a Rule Maker not a Rule Taker, which was agreed and adopted on August 27th, 2021 states the need for a ‘New Debt Movement’ and new outlook to issues domestic resource mobilisation (DRM).
However, the declaration also states that DRM is hindered by an economic and financial architecture that promotes profit shifting, overly generous tax incentives and illicit financial flows. Cases of smuggling of resources, especially gold are rampant in the region, further weakening revenue earnings for these economies.
But in a historic move to deal with the debt burden, several African countries came together to establish the African Borrowing Charter, which if adhered to can be a saviour for the region.
This charter is a significant milestone for the continent, as it lays out a set of principles and guidelines to govern borrowing; it aims to ensure responsible borrowing practices, transparency, and accountability in borrowing by African countries.
The charter was developed with input from various stakeholders, including civil society organizations, multilateral institutions, and African governments. It seeks to address key issues related to borrowing by African countries, including debt sustainability, transparency, and accountability.
The charter requires African countries to conduct regular debt sustainability assessments and to develop transparent and comprehensive borrowing plans. The charter also requires African countries to disclose all borrowing terms and conditions and to ensure that borrowing is used for development purposes.
Zimbabwe has begun to see improvements in debt transparency with Treasury presenting information on public debt, which civil society has described as a step in the right direction towards enhancing transparency and accountability in public finance management.
Latest international budget partnership rankings place Zimbabwe in third position in Africa on budget transparency, something the civil society sees a significant improvement since the second republic came into power.
On an international level, the country is ranked 41 out of 120 economies.
Among the factors considered are presentation of debt information, consultations in budget processes as well as publication of a budget strategy paper.
Release of Annual Debt Management Report highlights strides taken byTreasury in providing information on the country’s debt situation that is both domestic and foreign debt figures, something that the Government adopted as ways to improve transparency and accountability.
Bongani Ndlovu