Debt: whither Zimbabwe? | The Herald

via Debt: whither Zimbabwe? | The Herald November 18, 2013 by Tichaona Zindoga

A couple of weeks ago, it was announced – wrongly it turned out – that Zimbabwe would be among five countries whose debts would be cancelled by France. The others were Somalia, Chad, Ivory Coast and Sudan. Relief was already evident in those keen on Zimbabwe’s debt burden, but in an email to this writer, the French Ambassador to Zimbabwe said Zimbabwe was “not eligible to the Most Indebted Poor Countries (PPTE in French) Initiative as long as it has not settled its arrears with the International Financial Institutions.”

Ambassador Laurent Delahousse promised: “Appropriate decisions on Zimbabwe’s bilateral debt to France will be taken in due time, within the framework of the Club de Paris, once the relevant procedures have been followed.” Some statistics put US$3 billion as owed to the Paris Club by Zimbabwe.

Ambassador Delahousse applauded Zimbabwe for continued engagement with International Financial Institutions, “in particular on the issue of the Staff Monitored Programme.”

“All this goes in the right direction,” he said.

Meanwhile, the Finance Ministry has validated public debt, which thankfully showed some exaggeration in the current estimates of between US$10.7 billion and US$11 billion. Perhaps something between US$6 billion and US$7 billion, Finance and Economic Development Minister Patrick Chinamasa says.

Zimbabwe is by no means the most indebted country (even less poorest) in the world but the debt burden is surely giving authorities sleepless nights.

Not only has this precluded new borrowings and debt cancellations (which France would have kindly done), even in the absence of US sanctions that compel American officials to oppose extension of loans to, and cancellation of indebtedness of Zimbabwe.

Zimbabwe’s credit rating is poor meaning it is lent to at higher interest rates, over short periods.

In the mean world of economics, even non-experts in the field would know, the accrued debt bulges daily by way of interests, which defaults can only worsen.

The result is that Zimbabwe will not have cash to finance development and undertake major capital projects. ZimAsset, the latest economic blueprint in town hoped to be the sleight of hand for Zimbabwe’s economic turnaround, also situates the debt burden.

It states that: “Fiscal space remains severely constrained due to poor performance of revenue inflows against the background of rising recurrent expenditures and a shrinking tax base. The economy has also been saddled with a high debt overhang with an estimated debt stock of US$10 billion as at December 2012 caused by the country’s failure to access international capital and investment inflows as illegal economic sanctions have not been removed.”

Under the section dealing with “Funding and Debt Management” it is proposed, inter alia, that there will also be need to accelerate the progress which the country has registered in the re-engagement process with the International Financial Institutions (IFIs) and creditors.

“This will be done through the policy thrusts that Government has finalized with these institutions under the auspices of the Cabinet approved Zimbabwe Accelerated Arrears Clearance, Debt and

Development Strategy (ZAADS) and the Zimbabwe Accelerated Re-engagement Economic Programme (ZAREP).” The management of the debt is a rather complex, even emotional issue.

Just imagine what would be the conditions if Zimbabwe had qualified for France’s debt cancellations.

We are told that in this wonderful French plan, countries would still be required to pay up, and the money would be channeled back as aid. What an arrangement!

Just how the local sheikhs will deal with this will be very interesting. Not so many moons ago it was Tendai Biti who was trying to normalise the country’s books of accounts and proposed that Zimbabwe be rated “highly indebted poor country”.

Some quarters went ballistic, perhaps justifiably so, arguing that Zimbabwe was “too rich to be poor”.

Some people counter-argued that it was time Zimbabwe swallowed its pride and accept the tag so it would be salved of its burden. Still, others argued, the economic measures prescribed by the likes of IMF do not come cheap and come with conditions that impugn national sovereignty and requires structural adjustment.

After similar attempts to play by the book of the Bretton Woods Institutions harvested social misery in retrenchments and depletion of social services, structural adjustment has become such a dirty word.

Will Chinamasa accept it?

Already we know for a fact that he is not happy with the IMF’s insistence on the so-called Staff Monitored Programme but wants money injected for productive and development purposes.

Then it is hoped the Sovereign Wealth Fund will be another vehicle through which Zimbabwe’s debt can be cleared. An SWF is investment facility created by Government. Resource-rich countries from Kuwait to Botswana have these vehicles, which are worth trillions of dollars. The creation and operationalisation and currency of Zimbabwe’s own SWF will determine the debt complexion of the country in the coming few years.

One of the critical elements in the debt clearance effort will be how the country deals with the issue of sanctions, particularly the US. As transactions take place in US dollars, and thus handled by the Federal Reserve, an animal called OFAC is likely to sniff out and hound Zimbabwe’s funds.

So, in part, can the Euro be the new hero?

 

COMMENTS

WORDPRESS: 8
  • comment-avatar

    The herald and china-masa can never ever wish this debf of zanu away. Stop u naive academic pseudo economic posturing

  • comment-avatar

    Sovereign Wealth Fund (SWF) is a great start for Zimbabwe and certainly the Office of Foreign Asset Control (OFAC) would be sitting on both sides of the Zimbabwe’s shoulders to overload its abilities to move freely toward meeting its goals while trying to implement the process. However, there’s a very doable international investment process that can enable Zimbabwe in getting sizable amounts of investments into Zimbabwe without borrowing one cent but Zimbabwe’s technocrats must learn how does the West spins it’s propaganda machine to raise hundreds of billions of dollars out of thin air! Zimbabwe has lot more than most of the Western countries when it comes to its natural resources but there can’t be any international investment participation unless Zimbabwe embarks on the same “propaganda” type of moves. If Zimbabwe can think 2% in the ways Walls Street thinks then 10 billion or 20 billion is not that of big hurdle to overcome but the trick is if Zimbabwe financial think tank has the ability to think and act in a smaller scale like the Wall Street! There are 100% doable scenarios that Zimbabwe can develop to raise billions in a matter of 6 months but unfortunately, no one in Zimbabwe is thinking like Wall Street! And if Zimbabwe approaches the Wall Street big wigs they won’t even engage on a dialogue due to it’s close-knit workings with the State Department etc. So it has to be someone from mid to lower circle of Wall Street insider who can show Zimbabwe how to. It’s something Minister of Finance must consider very carefully of who to confide in before even approaching the Wall Street. Iran today has the most rigorous OFAC watch dog policy in place and yet there are ways that Iran still does business in tens of billions of dollars a month. How? Only a Wall Street insider who is may be sincere and willing to work with Zimbabwe in showing how to raise large amounts of funds in short period of time. Unless someone in Zimbabwe start looking into this possibility, nothing will happen and the same old fashion standardized financial thinking will prevail. Dire situations require drastic and innovative thinking to overcome the most insurmountable challenges. Think out of the box and you’ll find the solutions! I’ve saying this before the election of President Mugabe and no one has even thought of looking into this very doable possibility. Rest of the world does it every time they need money to be created from “thin air”… they call the ghost busters.. the Wall Street Gurus!

  • comment-avatar
    Charlie Cochrane 8 years ago

    ‘Can the Euro be the new hero?’
    The Euro was always the hero and worth billions of dollars to your country until they (Europeans) were murdered, abused, had their possessions stolen and were disenfranchised and forced out of the country how dare you turn to our ‘kith snd kin’ for more ‘filthy lucre’………..get it from your black brothers to the north, south, east or west you disgusting hypocrites.
    Pamberi Murungu, Pasi muntu.

  • comment-avatar
    Nyoni 8 years ago

    Zimbabwe can move out of debt if only stubborn leaders can get off their backsides and hire true economists to do the job. The biggest problem we are facing is that there are people who prefer the status quo so that there is no competition from others eg the Diaspora etc.

  • comment-avatar
    Boss MyAss 8 years ago

    For those who like to believe that political freedom is the surest route to prosperity, it’s deeply depressing news.His misrule has been a textbook case of how dictators can ruin their nations. When Zimbabwe went independent in 1980, it had bright prospects: a thriving farming sector and high literacy rates. But after Mugabe started to purge the white farmers, the former breadbasket of Africa was taken to the brink of famine, with starvation used as a weapon against millions.

    China–Zimbabwe relations date back to January 1979, during the Rhodesian Bush War. The Soviet Union supported Joshua Nkomo’s Zimbabwe African People’s Union, and supplied them with arms; Robert Mugabe’s attempts to gain Soviet support for his Zimbabwe African National Union were rebuffed, leading him to enter into relations with Soviet rival Beijing, culminating in a January 1979 meeting in Mozambique in which both sides affirmed their intent to cooperate more closely. The two countries formally established diplomatic relations on 18 April 1980, the day of Zimbabwe’s independence. Two months later, Zimbabwe’s foreign minister Simon Muzenda visited Beijing to express his thanks; he was followed by Zimbabwean president Robert Mugabe himself the next year.Mugabe places great importance on Zimbabwe’s relations with China, especially after the 2003 standoff with the European Union resulted in capital flight and economic depression. Ties have deepened inline with Zimbabwe’s political isolation from the European Union; China has been described as the “only major international supporter” of Zimbabwe, due to their principle of non-interference in internal affairs such as human rights issues. However, there are increasing signs that China remain apprehensive about their relations with Zimbabwe and prefer to concentrate their political capital on countries with oil reserves. Chinese president Hu Jintao did not visit Zimbabwe on his February 2007 tour of southern Africa, though his schedule took him to a number of countries near Zimbabwe, including Mozambique, Namibia, South Africa, and Zambia.

    The success of Mugabe and his ZANU-PF party reflected direct intervention by the Chinese Communist Party, financial support topping $1 billion in diamonds and revenues from three companies and two African presidents, armed intimidation by security forces and vote rigging en masse.The good Lord had less to do with it. Revenue related to the diamond trade, if reported properly, could provide decent jobs for Zimbabweans.There are people around Mugabe who are benefiting. It’s in their interest that he will stay. They are few, but they are benefiting. This is their last chance to loot the country, to build up their wealth. And they are stronger than those who realise that change is inevitable. It’s the same in the army. Most of the junior officers are disgruntled, they’re unhappy, but because their bosses are telling them to stick by Mugabe they do. There is too much of a culture of fear, of impotence, for them to do something. The war veterans are also split, but it’s not clear which faction has more support. Some believe Mugabe must go, some are diehards. But it can’t go on like this for much longer; it must be the beginning of the end.

  • comment-avatar
    Boss MyAss 8 years ago

    The violence perpetrated by ZANU PF
    and partisan security forces in the 2008
    election followed similar outbreaks during
    the elections of 2000, 2002 and 2005.
    The role of
    the military, police and CIO in past
    violence underscores the need for
    security sector reform. A crucial part of
    any reform must be civilian and
    democratic control of the budgets of
    security organs. Off-budget financing
    allows security forces to set their own
    agendas and fund operations from their
    own resources.
    The likely part-ownership and partcontrol
    of Anjin by the Ministry of
    Defence, military and police and the
    apparent part-ownership and part-control
    of Sino Zimbabwe Development, by the
    CIO, create vehicles for off budget
    financing of the security sector and by its
    very nature this undermines Zimbabwean
    democracy.
    Sam Pa appears to have provided a
    significant amount of money, which
    according to a CIO document was
    US$100m, to the secret police (this is a
    large sum: in 2011 the budget of the
    CIO’s parent department – the Office of
    the President and Cabinet – was
    US$121m). Together with the apparent
    provision of vehicles for use by the CIO,
    these actions undermine Zimbabwe’s
    democratic processes and institutions.
    The CIO may have used this money to
    actively undermine senior MDC politicians
    through covert activities under the
    codename “Operation Spiderweb”.Global Witness believes that Anjin is
    part owned and part controlled by the
    Zimbabwean military, police and
    Ministry of Defence.Marange
    concession was granted to Anjin by
    the Defence Minister Emmerson
    Mnangagwa, a front-runner to succeed
    President Mugabe.“Zimbabwean members of the executive
    board of Anjin Investments (Pvt) Ltd are
    appointed by Zimbabwean government.
    Chinese side [sic] pays close attention to
    the operation management and partner’s
    cooperation of the company, as for the
    status and political background of
    Zimbabwean members.

    The Chinese members of the executive
    board Mr. Jian Qingde, Mr. Jiang Diaru,
    Mr. Tian Shiyue, Mr. Jiang Zhaoyao, and
    Mr. Li Renfu, Mr. Zhang Shibin and Ms.
    Lu Qingxia.
    The Zimbabwean executive board
    members of Anjin are:
    – Mr. Martin Rushwaya, the
    permanent secretary in the Ministry of
    Defence;
    – Mr. Oliver Chibage, a
    commissioner in the Zimbabwe Republic
    Police (ZRP);
    – Ms. Nonkosi M. Ncube, a
    commissioner in the ZRP;
    – Mr. Munyaradzi Machacha, a
    ZANU PF director of publications;
    – Mr. Mabasa Temba Hawadi, a
    director of Marange Resources (Pvt) Ltd,
    a subsidiary of the ZMDC;
    – Mr. Morris Masunungure, a
    current or retired officer in the Zimbabwe
    Defence Forces (ZDF);54
    – Mr. Romeo Daniel Mutsvunguma,
    a retired colonel in the ZDF alleged by
    Human Rights Watch to have
    participated in violence in 2008.