Melinda Kusemachibi
Government’s continuous assumption of debts of state-owned enterprises without determining how the arrears were accrued fuels corruption and misallocation of resources, former Zimbabwe Finance Minister Tendai Biti recently warned.
Speaking at Zimbabwe Public Debt Indaba organized by Zimbabwe Coalition on Debt and Development (ZIMCODD) held on March 29, 2022 in Harare Minister Tendai Biti said that debt assumption is a waste of time and command agriculture is the vehicle being used.
“Debt assumption is not just a catalyst for deep stress, it is a catalyst for group, parallel government ideality because they are running for a parallel government then these debt assumptions are then fostered on the ordinary people of Zimbabwe and command agriculture is a principled vehicle. So debt assumption is a waste of time, a waste of energy,” said Biti.
He added that debt assumption in form of US$3.5 billion was signed with farmers without legislature approval and it is being used to break the law.
“In 2019 the government of Zimbabwe came up with the financial bill of US$10,6b in which they sought condemnation of expenditure that they spent outside parliament between 2015 and 2018 to the sum of US$10,6 billion and they wanted us to condone it without giving out the details on what they actually spent the money.
“Debt assumption in the form of US$3.5 billion for farmers; the constitution is very clear that farmers will be paid for improvement, that an Act of parliament must define the formula, method that is going to be used but the government went on to sign the agreement with farmers without the legislative. Who are the actual farmers benefiting?
“Debt assumption is being used to break the law, cover up the law, used to override parliament, cover up for illegal guidance, for corruption and therefore we should say no to debt assumptions. Public Debt Management Act should be strengthened to say no to debt assumption,” said Biti.
Government has assumed a number of state-run firms’ debts amounting to billions of United States dollars despite warnings that it is cultivating a bad culture.
Some of these include Zisco Steel US$500 million and the Reserve Bank of Zimbabwe (RBZ)’s US$1.4 billion debts.
Biti added that government was giving out guarantees to private companies in 2020 when Covid-19 arose.
“Another form of debt assumption is illicit debt contractions which result in debt assumption and are the guarantees that government gave to private companies in 2020 when Covid-19 arose, government issued a lot of guarantees to the private sector. But why should government guarantee this to private sector?
“A lot of debt is by contracted through uproar, and I know that ZIMCODD is trying to file some court applications to challenge that. So guarantees are illegal and are also contributing to this debt hazard,” said Biti.
In 2019, government approved the assumption of TelOne’s US$383 million legacy loans. Cabinet last year also resolved to assume the Air Zimbabwe debt exceeding US$300 million. In January this year, government assumed US$3.8 billion fresh RBZ legacy debts.
This is the amount RBZ agreed to pay as opposed to over US$6 billion being claimed by 855 companies, which the apex bank failed to help repatriate funds due to forex shortages.
Biti also said that National Railways of Zimbabwe (NRZ) collapsed because of inefficiency, corruption and mismanagement.
“Another form of debt assumption over USD 2 billion has been assured this way, and to date parastatals national records of staffing, l believe around US$495m as huge but why is the NRZ collapsed? NRZ collapsed because of inefficiency, corruption, mismanagement. So government assuming that huge debt it is sanitizing inefficiency.
“It is sanitizing corruption. But why should tax payers pay for shaggy deals, corruption, mismanagement, incompetence? Because what they did as parastatals is they let their relatives run without qualifications and skills. Debt assumptions for National Railways of Zimbabwe (NRZ), Grain Marketing Board (GMB), Civil Aviation Authority of Zimbabwe, NetOne, TelOne, ZESA, are used for funding political campaigns,” said Biti.
In its February 2022 economic report, the ZIMCODD said as of September 2021, public and publicly guaranteed (PPG) debt was at US$13.7 billion. Of this debt, external debt constituted US$13, 2 billion while domestic debt was US$532 million. This public debt constitutes about 85% of the country’s GDP, way above the 70% threshold.
Accounting for the January 2022 assumption of RBZ debt, ZIMCODD said total public debt will expand to US$14. 2 billion.
The RBZ debt alone, totaling US$5. 4 billion now constitutes over 30percent of total debt stock.
Debt assumption, according to ZIMCODD will have negative socio-economic effects on ordinary people, as it translates to an extra financial burden on taxpayers.
“Generally, a debt-Gross Domestic Product (GDP) ratio shows a country’s capacity to repay its debts, with a rising ratio indicating that debt is growing faster than national income.
“As such, the ballooning Zimbabwe debt is a cause for concern, especially under the context of the Covid-19 pandemic, fragile domestic election season, worsening global geopolitics between nuclear superpowers, and a mounting global inflation wave.
“Therefore, there is a need to undertake an independent public debt audit that will inform the scale and nature of the country’s debts, which are often not transparently publicized.
“An audit will also become a building block to popularize discussion about the legitimacy of certain debts and whether they should be repaid,” read part of the ZIMCODD report.
