The move by President Robert Mugabe to sign the controversial Reserve Bank of Zimbabwe (RBZ) Debt Assumption Bill into law is a slap in the face for impoverished taxpayers who now have to pay for the elites that have a penchant to live beyond their means.
Mugabe’s move means that the government has taken over the RBZ’s controversial $1,2 billion debt and taxpayers would have to repay the money.
The $1,2 billion includes $200 million that was used to buy farming equipment dished out to Zanu PF and government officials during Gideon Gono’s era as governor of the RBZ.
Under Gono, the RBZ was involved in many quasi-fiscal activities that were blamed for the record hyperinflation that eventually led to the scrapping of the Zimbabwe dollar.
The transition from the Zimdollar era to the multicurrency dispensation ruined many lives; especially pensioners who had their savings wiped out and had no recourse to the law.
Parliament passed the law despite criticism from the opposition and ordinary Zimbabweans who argued that it was improper to pass on the debt to taxpayers without trying to recover the money from the RBZ debtors.
The RBZ also refused to release the list of debtors so that Zimbabweans would know what they are paying for.
Zanu PF, which enjoys a two-thirds majority in Parliament, had the muscle to railroad the Bill and now poor Zimbabweans would have to pay the debts for the beneficiaries of the farm mechanisation that include legislators that took part in the lawmaking process.
The passing of the law has significant implications for the government’s already unsustainable debt. According to reports, Zimbabwe’s publicly guaranteed debt stood at $8,4 billion as at end of June 2015. The country has an external debt of $6,7 billion, representing about 47% of gross domestic product, and domestic debt of $1,7 billion.
Zimbabwe’s large debt overhang has been long identified as one of the biggest impediments to economic revival. The International Monetary Fund (IMF) has repeatedly urged the government to refrain from further concessionary borrowing as this would negatively impact on any debt resolution strategy.
A country with a big debt overhang struggles to mobilise loans and capital in general to spur economic growth.
Zimbabwe owes everyone from the World Bank, African Development Bank, European Investment Bank, IMF to countries such as China and Iran.
Over the years, Mugabe’s government has pretended not to care about Western funders that refused to release further loans until there was a sustainable debt repayment plan.
However, attempts to link up with countries such as Iran, China and Russia have shown that universally investors expect their money to be paid back as per agreements.
Therefore, the addition of the $1, 2 billion RBZ debt to the publicly guaranteed debt has serious ramifications to the economy, which would affect generations to come. Mugabe should reflect on the moral implications of the new law, which places a burden on the poor of the poorest whose cause he claims to champion.
His Zanu PF government is responsible for the economic mess the country finds itself in and making people pay for looting by the well-connected and for failed RBZ policies is cruel. The farm equipment hardly had an impact on the country’s agriculture industry whose decline continues. This is a demonstration that the beneficiaries did not deserve the investment made by the central bank.
The effects of the patronage system that Mugabe is financing with taxpayers’ money would haunt the economy for many years to come.