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AFTER nearly a year of wrangling over strategies to clear the US$5,7 billion national debt, parties to the inclusive government have finally found common ground and will adopt a hybrid model that uses traditional methods and resources pledging.
Clearing the debt had split cabinet along political lines with MDC-T advocating for Zimbabwe to be declared a Highly Indebted Poor Country (HIPC).
Zanu PF on the other hand argued the country “is too rich to be poor” and could pledge its vast mineral resources to clear the debt.
Finance minister Tendai Biti told journalists on Thursday that Zimbabwe will work on a document, Zimbabwe Accelerated Arrears Debt and Development Strategy to deal with “the nuts and bolts” of the debt clearance.
The model has already sailed through cabinet.
Biti said a debt strategy has to work after the key issues — inflation and unsustainable wage levels — were addressed.
“There is no point of rushing into dealing with debt particularly if you are going to use the traditional methods without dealing with key policy issues that stand in the way of debt strategy. . . unsustainable wage levels, inflation are the things that stand in the way of debt strategy,” he said.
“There has to be a track record of good macroeconomic performance.”
According to a report seen by Standardbusiness the debt clearance strategy model was recommended by a cabinet committee on debt chaired by Deputy Prime Minister Arthur Mutambara.
“While the efficacy of traditional methods such as HIPC should be seriously considered, the country should not be straight-jacketed,” Mutambara’s report said.
“In addition to clarity about both the benefits and constraints of such methods, room should be created for the use of hybrid approaches that combine HIPC-type techniques with the creative use of natural resources for development.”
The report recommended that the debt problem should be addressed concurrently with the push for the removal of sanctions.
“The country cannot effectively resolve the challenges presented by the US$5,7 billion debt without simultaneously dealing with the scourge of illegal economic sanctions,” it said.
“This means that, in Zimbabwe, a holistic and sustainable debt strategy must involve three inextricably linked pillars: traditional debt resolution methods (such as HIPC), creative use of natural resources for development, and unequivocal efforts to remove sanctions against the country.”
The report said that all key stakeholders interested or involved in addressing the debt crisis in Zimbabwe, in particular the IFIs (international financial institutions, World Bank, International Monetary Fund and African Development Bank) and western countries “must overtly acknowledge that Zimbabwe is operating under economic sanctions”.
“The work of the Cabinet Re-engagement Committee responsible for crafting a National Sanctions Removal Strategy must be directly linked to that of the Inter-Ministerial Committee on Debt.
“In fact, addressing the debt crisis should be understood as a sanctions removal mechanism,” the report said.
The cabinet re-engagement committee will travel to Brussels on Wednesday for a meeting with EU officials on sanctions.
Mutambara’s committee also has Biti, Stan Mudenge (Higher and Tertiary Education); Herbert Murerwa (Lands and Rural Resettlement), Olivia Muchena (Women’s Affairs, Gender and Community Development) and Priscilla Misihairabwi-Mushonga (Regional Integration and Economic Cooperation).
Zimbabwe’s debt is unsustainable.
According to the Debt Sustainability Analysis exercise done last year, the country’s debt would be highly unsustainable until 2029.
Since 2005, government has been sued by a number of creditors including KFW (Germany), Daro Film Distributors (Switzerland), UBS AG (Switzerland), SACE (Italy), ING (Netherlands), Exim Bank (USA), West Merchant Bank and Lloyds Bank (UK).
Some of the creditors have won court cases against the government.
In the case of Exim Bank, government ended up paying an amount of US$42,2 million in 2007 towards its arrears.
BY NDAMU SANDU
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