Gift Phiri 26 June 2017
HARARE – Zimbabwe’s economy remains fragile with a “precarious” level of
public debt during the year to March rising to over $11 billion, the
Parliament Budget Office said in its latest report.
Zimbabwe’s domestic debt rose 40 percent to $4,3 billion, with external
debt standing at $7,5 billion or 53 percent of GDP.
Of the $7,5 billion external debt, $5,2 billion is in arrears.
“Zimbabwe has been in debt distress for a long time and as at 31 March
2017, the country’s public debt stood at $11,6 billion or 82 percent of
GDP (gross domestic product),” Parliament’s Budget Office said in the 2017
first quarter budget performance and outlook report.
The broke government has been using a raft of taxes and treasury bills to
bankroll its $4,1 billion 2017 national budget since international
institutions stopped lending to President Robert Mugabe’s administration,
demanding clearance of the $7,5 billion in arrears.
Finance minister Patrick Chinamasa has said government was moving to clear
its ballooning debt, after the IMF reinstated Zimbabwe’s voting rights
after clearing its 15-year-old $125,3 million financial arrears in loan
and interest with the Washington-based institution in October last year.
The IMF has relaxed its restrictions and has been providing consulting
support to Zimbabwe since the country moved toward constitutional reforms
and showed improvement in economic policy cooperation with the Fund.
In April, Chinamasa said Zimbabwe has met all conditions to clear arrears
to the World Bank and African Development Bank, opening the door for
possible future funding from the IMF, suspended in 1999.
Chinamasa said facilities negotiated by the Reserve Bank of Zimbabwe to
repay the $1,75 billion arrears had been “scrutinised and scrutinised” by
the World Bank and AfDB, who were satisfied, but did not state where the
money came from.
“Clearance of debt arrears is expected to open the door to foreign finance
inflows and possible debt treatment by the Paris Club and non-Paris Club
Bilateral Creditors through an IMF financing programme,” Chinamasa said.
But Parliament’s Budget Office said there was little progress in arrears
“With regards to re-engagement efforts, not much progress has been
recorded in the first quarter as the re-engagement with the Bretton Woods
institution is hinged upon Zimbabwe repaying over $1,8 billion it owes to
the World Bank and AfDB over and above other conditionalities of economic
“The country also owes $ 2.2 billion to the Paris Club and $1.1 billion to
non-Paris,” Parliament’s Budget Office said.
Morgan Tsvangirai’s MDC has called on government to get Zimbabwe’s
staggering billions in debt written off under the Highly Indepbted Poor
Countries (HIPC) initiative – a debt relief programme managed by the IMF
and the World Bank.
To qualify for HIPC status, a country’s debt has to be considered to be
beyond its ability to repay from its own resources, and then commit to
sound economic management and institute broad reforms.
But Mugabe’s ruling Zanu PF party does not want Zimbabwe classified as a
HIPC saying the debt was a result of Western sanctions and the move will
facilitate foreign interference in the country’s economic and political
affairs, as well as project the country as an economic basket case.
“They have been arguing with this since the time we were in government and
they would say in Cabinet, `no, how can we be called a poor country, we
have diamonds, we have gold and we have platinum. Surely, we cannot be
called poor’,” MDC economic policy chief and former Economic Planning
minister during the GNU, Tapiwa Mashakada, said.
“So it is pride, hollow pride. You can have all those resources but if you
don’t utilize them and invest to make money out of those resources, it
doesn’t mean anything to the ordinary man on the street.”
This comes as the cash-strapped government has battled to pay its bloated
civil service, staggering pay dates, amid a tightening liquidity crunch.
Earlier this year, Mugabe’s government buckled under pressure to borrow
$180 million locally to pay outstanding bonuses for 2016 after civil
servants threatened to go on strike.
“The government’s decision to pay the unbudgeted 2016 bonus after pressure
from employee unions is likely to worsen the situation as Treasury Bills
(TBs) worth $180 million are expected to be floated in the market to
finance these bonus payments,” Parliament’s outlook report said.
This comes just after the government decided to clear its contribution
arrears to National Social Security Authority (Nssa) spanning from June
2013 with TBs worth $180,9 million with tenure of seven years and a coupon
rate of 5 percent per annum.
The country was estimated to have about $2,1 billion worth of TBs in the
market as at February 28 2017, issued to bridge the government’s funding
gap and clear the central bank’s debt, according to Parliament.
The Reserve Bank in January informed that government had issued long-dated
TBs of $549 million to banks for the acquisition of non-performing loans
by the Zimbabwe Asset Management Corporation (Zamco), long-dated TBs
amounting to $300 million issued for the capitalisation of institutions
that include the Reserve Bank, Agribank, IDBZ, ZB, Cottco and drugs
manufacture CAPS; and has also issued medium to long-dated TBs amounting
to $780 million under the Reserve Bank Debt Assumption Act for the central
bank debt taken over by government.
Short-to-medium-dated TBs amounting to $450 million have also been issued
to finance the gap between expenditure and revenue collection by
Parliament’s Budget Office said the economy is grappling with “several
challenges ranging from underproduction, unsustainable fiscal deficit,
liquidity constraints, depressed international commodity prices, debt
overhang as well as limited Foreign Direct Investment (FDI).”
Mugabe’s indigenisation policies – which require local majority ownership
of companies – has scared off much needed foreign investment.
Parliament’s Budget Office said: “No movement has been recorded with
regards to amendment of the Indigenisation and Economic Empowerment Act to
bring it in line with a policy clarification issued by the President in
High unemployment and power and water cuts have also taken their toll.
The country still grapples with severe liquidity challenges manifested
trough acute cash challenges with no solution in sight. Mugabe’s
government has been hit by dwindling foreign exchange inflows and acute
shortages of cash that has forced banks to limit cash withdrawals to as
low as $20.
Parliament’s Budget Office said the Office of the President and Cabinet,
which has been coordinating policy pronouncement as well as any required
clarifications to avoid conflicting interpretations of policies by
different government ministries and departments, “has not moved in to
clarify government policy on use of South African rand and repealing of
(statutory instrument 64) SI64 (banning imports of basic goods) despite
numerous conflicting press reports.”
However, Parliament projected higher economic growth of 3,7 percent this
year, from an initial projection of 1,7 percent following a better than
expected agriculture season
“It is pleasing to note that the country is on course to exceed the
anticipated growth target buoyed by the successful agricultural season
after the country received above normal rainfall,” Parliament’s Budget
Office said. “Commodity prices have moderately recovered and that is
expected to add another impetus to the growth target.”