Finance minister Tendai Biti said Zimbabwe was suffering from the lack of economic integration with the rest of the world due to the debt question. “The debt question is the real sanction facing Zimbabwe, the rest is politics,” said Biti.
“Agreements with compound interest on the principal amount were signed (by previous administrations) yet the country operates under Roman Dutch law. Ninety percent of the debt constitutes arrears rather than the core debt.”
Biti said part of the problem was centred on poor negotiation of the agreements. The country owes an invalidated figure of US$9,1 billion to various external financial creditors.
The growth in the external debt position would effectively constitute 118% of the country’s Gross Domestic Product (GDP), a situation Biti described as “unacceptable”.
“A validation and reconciliation exercise of the external debt data-base with all creditors is currently underway,” he said. Biti said the full extent of Zimbabwe’s external indebtedness and the effect of capitalisation of interest due to arrears accumulation urgently needed to be quantified.
Official figures indicate that Zimbabwe’s GDP stands at an estimated US$11 billion while government is operating on a US$3,4 billion budget, excluding diamond revenues.
At independence in 1980, government’s thrust was to finance post-war reconstruction projects as well as fulfilling the development agenda that included free education, health and higher wages.
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However, this culminated in increased expenditure, which did not match with revenues resulting in the country experiencing high fiscal deficits and rising public debt.In 2000, Zimbabwe began defaulting on payments.
“The accumulation of external payment arrears resulted in some litigations against the government by creditors,” said Biti. “The debt burden has been a stumbling block towards economic recovery initiatives and has impacted negatively on the country’s international credit.”
The finance ministry established the Zimbabwe Aid and Debt Management Office (Zadmo) in December 2010. “Zadmo is currently reviewing the existing institutional and legal framework for debt management,” he said, adding that government would not absolutely rule out presenting the case for odious debt.
Odious debt is a principle of international law that affirms that no people or their present government should be obliged to pay debt previously acquired under illegitimate conditions.
Such debts are, therefore, considered by this doctrine to be the personal debt of the regime that incurred them and not debts of the state.
Debt woes impeding economic recovery
The non-resolution of the debt issue has become a major impediment to the country’s economic recovery and development witnessed by the consummation of the inclusive government in February 2009.
Due to the debt, Zimbabwe has been failing to access concessionary facilities such as the US$15 billion World Bank’s Infrastructure Recovery Asset Platform, the International Monetary Fund (IMF) Balance of Payment support including the US$93,1 million Special Drawing Rights (SDRs) allocated to member countries in 2009.
It has also failed to access the African Development Bank’s (AfDB) Performance Based Allocation to African Development Fund (ADF) for eligible countries since the late 1990s.
