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ZIMBABWE’s concessionary borrowing has declined to below 10 percent as compared to the period 2006-2009 where concessionary debt levels were 30 percent of total country’s external debt. Speaking at the launch of the United Nations Conference Trade and Development Economic Development in Africa Report 2016, Debt Dynamics and Development Finance in Africa, Africa Capacity Building foundation (ACBF) director Thomas Munthali said Zimbabwe is among the nine countries on the continent who are in serious debt distress.“Before 2006 – 2009, over 30 percent of Zimbabwe’s external debt was concessionary, but as of now cheap debt has become lesser and will aid debt distress for low income countries,” he said.
Concessionary debt refers to lending extended by creditors at terms below market terms with the aim of achieving a certain goal and with Zimbabwe’s current external debt amounting to over $9 billion, the country is not in a position to attract funding at favourable terms. The country’s debt is largely as a result of arrears to multilateral lenders such as the IMF, World Bank and African Development Bank.
Mr Munthali said the gross domestic product growth rate has been growing below the debt level rate, compounded further by declining commodity prices and other economic fundamentals.
“Current account deficit levels will increase the level of debt distress,” he said.
Meanwhile, Zimbabwe has developed a debt clearance strategy for its external debt and the plan is expected to succeed before year-end.
Zimbabwe’s debt distress is worsened by a lack of diversified export base and declining terms of trade, which makes it difficult for the country to adjust to changing world demand for tradable goods and the strengthening of the US Dollar against regional currencies has worsened the country’s plight as exports have become uncompetitively priced.
The African Development Bank, estimates that the country’s GDP growth is projected at 1,6 percent at close of the year on the back of anticipated expansion in three sectors, including the financial industry.
According to the UNCTAD report, African governments need to add new revenue sources to finance their development such as remittances and public private partnerships and clamping down of illicit financial flows.
The report says Africa’s external debt ratios appear manageable, but African Governments must take action to prevent rapid debt growth.
“A decade ago of strong growth provided many countries with the opportunity to access international financial markets. This saw external debt stock growing 7.8 percent in 2009, increasing to 10 percent in 2011 to 2013 to reach $443 billion which is 22 percent of gross national income by 2013,” the report says. — Wires.
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