Simbiso Marimbe Marasha
The Sunday Mail
July 5, 2009

Stakeholders met last week in Harare to discuss Zimbabwe’s external debt, which threatens the welfare of its citizens who have been ravaged by a deep social, economic and political crisis.

The Zimbabwe Coalition on Debt and Development (Zimcodd), a coalition of institutions and individuals focusing on social and economic justice, convened the meeting under the theme “The Economy in Transition Dialogue Conference: Towards a Sustainable Public Debt for Zimbabwe”.

The main objective of this initiative was to give various stakeholders, including the Government, an opportunity to deliberate on the country’s current unsustainable debt situation and collaborate on possible means of effectively managing it in the future.

Amongst the stakeholders present was the Minster of Finance, Mr Tendai Biti, who was invited to advise participants of Government’s strategy for dealing with Zimbabwe’s public debt in the short to medium term.

Since the Government was sworn in early this year, it has launched the Short-Term Emergency Recovery Programme (Sterp) to address key issues of economic stabilisation.

The total resource requirements for the key priority areas outlined in this programme are in excess of US$8 billion. Unfortunately, the country is not in a position to generate all these resources internally in the short term.

In order to mobilise external resources, the Government is actively engaging donor countries and multilateral agencies to re-open external lines of credit, provide grants and make investments.

In their view, the only obstacles to normalising these relations are the sanctions imposed by the West. Some of these sanctions specifically prohibit voting for the extension of any loans, credit or guarantee to the Government of Zimbabwe, or cancellation or reduction of indebtedness of the country to any creditor.

Whilst it is looking forward to receiving external assistance, Zimbabwe is saddled with an unsustainably high level of external debt, the bulk of which is owed to multilateral funding agencies.

Officially opening the conference, Minister Biti said Zimbabwe’s external debt, which stands at US$4,6 billion as at June 30 2009, is unsustainable and detrimental to economic recovery.

“At the moment Zimbabwe has no capacity to repay its debt and will not pay,” he said.

“Most of Zimbabwe’s external debt stock is in interest owed in arrears to the World Bank, the IMF, and the African Development Bank. The country’s indebtedness . . . has continued to increase largely due to the recapitalisation of interest whilst arrears are escalating due to continued defaults on principal amounts falling due.”

Analysts assert that if the debt is not reduced in a “consistent and systematic fashion”, it could balloon to US$7 billion by 2011. New credit lines could also add to this figure significantly.

In response to the Government, the IMF has announced that there are many outstanding issues which need to be resolved before it and other multilateral funding agencies resume financial assistance to Zimbabwe. Key amongst these issues is the clearance of arrears.

The institution has, however, agreed to resume technical assistance to targeted areas. The Government has announced it would resume debt service on a quarterly basis, as part of negotiations to reopen credit lines.

Sarah Bracking of Manchester University presented the findings of a study done in collaboration with Professor Lloyd Sachikonye of the University of Zimbabwe, which gives an incisive historical review of Zimbabwe’s debt profile from the late 1980s to the present day.

She also made recommendations on how Zimbabwe can deal with odious debt in view of the study’s findings which included options of a campaign for write-off or reduction, and alternative sources of development finance.

Another speaker, Vitalice Meja of the African Forum on Debt and Development (Afrodad), spoke on the “illegitimacy” of International Financial Institutions (IFI) lending, as a critical examination of the role of multilateral and bilateral lenders in the creation and growth of odious and illegitimate debt.

In his view, Zimbabwe should call for the total and unconditional cancellation of its IFI-related debts given the failure of the policy and advice that the World Bank prescribed in the past.

He called for the launch of multiple initiatives at international and local level such as the institution of transparent and accountable loan contraction process with clear roles for Parliament and civil society and reform of the IFIs to improve on their effectiveness.

Speaking in his individual capacity, Senator Obert Gutu said that it is imperative for the inclusive Government to urgently institute a debt audit.

He questioned the logic for the Government to ask for US$8 billion to jump-start Zimbabwe’s economy whilst avoiding the issue of past debts. He also said that the IFIs had abdicated their fiduciary responsibility to ensure that past loans were properly used.

“If the World Bank breaches this fiduciary duty it should be held liable and the debtor nation must be entitled to challenge the odious debt at international law,” he said.

The conference called for a comprehensive debt audit which will establish, among other things, the amounts borrowed, interests accrued, amounts repaid, conditions of lending, reasons for borrowing, use of funds borrowed, loan beneficiaries, historical and ecological aspects of the debt.

The findings of the debt audit would form the basis of the case for either repudiation or cancellation. The debt audit will help unlock resources currently earmarked for debt servicing and redirect them towards health service delivery, education, water and sanitation, among other social services which are in a dire state.

Zimcodd has been campaigning for a Citizens Debt Audit involving a broad base of civic organisations.

At the People’s Convention held in Harare in February 2008, civil society organisations and social movements adopted a resolution on the right of the people of Zimbabwe to refuse repayment of any odious debt as part of the broader People’s Charter.