Emmanuel Chitsika
The Zimbabwe Coalition on Debt and Development (ZIMCODD) has blamed lack of a robust debt sustainability plan as the major cause behind the accumulation of the country’s domestic debt as government has shifted much of its focus towards repayment of arrears.
Presenting during Zimbabwe Public Debt Indaba held in Harare, ZIMCODD Executive director Janet Zhou said government is failing to put in place a clear plan that would help resolve the settling of debts without affecting the socio-economic status of citizens.
“The absence of a robust debt sustainability plan resulted in accumulation of domestic debt. Government efforts are mainly towards repayment of arrears. ZIMCODD acknowledges government efforts on debt resolution to date. Despite these strategies, government has not been able to sustainably resolve the debt question.
“Strategies were implemented without debt audit versus debt validation while at the same time not considering the impacts of contingent liabilities (arising from guaranteed debts and assumptions) on the government’s financial position. Also the ignorance on the structural and political challenges inherent in the economy like poor governance, corruption and fiscal indiscipline,” said Zhou.
She also said debt assumption mainly by the Reserve Bank of Zimbabwe (RBZ) exceeding public expenditure thresholds has limited government abilities to respond in case of natural disasters.
“Debt assumption by the RBZ exceed public expenditure thresholds. Debt assumption is limiting government response to disasters like Covid-19, Cyclone Idai and of late the conflict between Russia and Ukraine. The worry we have is that this unsustainable debt by government has led to aggressive or heavy taxation on the general citizenry. There is also a rising trends in borrowing on the collateral which are now unclear in terms of timeframes.
“There is also worry over environmental degradation thus unsustainable for the next generation,” she said.
Zhou further urged government to adhere to constitutional provisions so as to ensure fiscal discipline and also consider the input of other important stakeholders like parliament and the civil society.
“Government thus need to adhere to constitutional provisions and even following Southern African Development Community (SADC) protocols to that effect. Also there is need to ensure that such benchmarks are placed in our constitution and or legal framework. We would like to realign and harmonize the laws especially on amendments currently being undertaken on Public Debt and Finance Management Bill.
“The process of debt clearance was also limited to government and creditor countries or institutions whereas parliament and civil society were mere spectators. The current debt stress is affecting social service delivery, women and even people living with disabilities. We hope as we go forward, there is need to move beyond debt validation. Thus there is need to politicize the issue of debts than just financializing them,” Zhou added.
Government has often been accused of violating the constitution by taking no steps to authorize expenditures thereby violating constitution of Zimbabwe Amendment (No 20) Act of 2013 (section 300), Public Finance Management Act (chapter 22:19) of 2009 section 61 of 30 percent threshold for government debt and 40 percent for guarantees.
Government overdraft at the RBZ far exceeds set limits in the RBZ Act (chapter 22:21) of 2015 with respect to the 70 percent debt to Gross Domestic Product ratio and SADC protocol on Finance and Investment benchmarks of 60 percent.
Government also has faced challenges despite the transitional stabilization programme with the country going through a cycle of staff monitored programmes with the IMF though no sign of debt cancellation or relief has been noticed under the current Second Republic administration.
