Published by the government of Zimbabwe
6 November 2009
editorial
Harare — ZIMBABWE is presently saddled with a US$5,7 billion debt that is impacting adversely on the economy, but we need to handle the issue more soberly and ensure that we employ debt settlement strategies that will not prove costly in the end.
It is important that we weigh all the available options and adopt the one that will leave the economy in better stead.
One of the strategies advanced in recent weeks for adoption by Zimbabwe is the Highly Indebted Poor Countries status.
Although this route is said to have benefits, a critical analysis would show that it could actually leave us in a worse position.
Although the HIPC status was originally meant to give poor countries a platform to engage creditors for debt reduction or cancellation, it has not yielded much in this regard and infact traps the poor.
Local and regional debt experts were agreed at a workshop held early this week that the HIPC status, coined by the International Monetary Fund, the World Bank and other international financiers in 1996, has its pros and cons, with the latter outweighing the former in most instances.
Experts at the Zimbabwe Coalition on Debt and Development workshop effectively dismissed this as an alternative.
In fact, HIPC is considered a weak bribe that gives an enticing promise of debt cancellation and yet the economic reforms prescribed leave governments heavily indebted.
Under the HIPC bracket, Zimbabwe will need to pursue an adjustment and reform programme for at least six months to demonstrate a track record of macro-economic stability, among other prerequisites.
Bad memories of the failed Economic Structural Adjustment Programme (Esap) quickly come to mind.
Zimbabwe accrued US$3,5 billion in new loans between 1991 and 1995.
Tanzania, for instance, was left with US$990 million in new debt on its books contrary to the debt-free status that had been anticipated.
The World Bank acknowledged that at one point the HIPC programmes in most countries had not produced the expected results.
Therefore, there are other alternatives such as debt restructuring, debt-rescheduling and debt-service restructuring, which can be less painful and more beneficial to the economy.
A thorough debt audit will need to precede any such initiatives to ascertain exactly how much Zimbabwe owes and how debt relief measures can be structured.
Zimbabwe is richly endowed with vast mineral resources, human capital, among its attributes which, when prudently applied, can reduce the debt burden substantially while promoting economic growth.
The potential to repay is there but the country remains hamstrung by economic sanctions imposed by the West.
The country can, therefore, only do so much. We demonstrated our ability to pay when, under sanctions the country, through the Reserve Bank of Zimbabwe managed to pay US$210 million between 2004 and 2006, including a one-off payment of US$120 million in August 2005.
This should send a clear message to international financiers that under normal, sanctions-free conditions, Zimbabwe can perform better.
If the economy begins to fire from all cylinders, as anticipated, Zimbabwe can clear its arrears and debts in a considerably short space of time.
It is about time that the West sees reason in removing the economic sanctions.
It will be for the good of the nation but ultimately it will help create a much better Zimbabwe that can play an effective role in the global economic system.
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In Zimbabwe, the crying of the lifting of sanctions when talking about the in debteness of the country is contradictory especially when the lifting of the so called sanctions will allow the borrowing of more money there by increasing the debt burden further. I do not believe that any acesses to new money now before we resolve the actual causes of our economic decline will help in any way. While Zimbabwe might be rich in natural resources, I do not think that without creating condusive environment for the resources to be taped and utilised in a way that will benefit the economy as a whole, there is no point in saying Zimbabwe can be in a position to pay off debts. Condusive environment does not only mean the removal of sanctions but also includes stable politics, rule of law, property rights, fremdom of association and free media. I do not in particular favour debt cancellation as it will lead to higher cost of borrowing in future and thus am opposed to this method of dealing with the debt, but I however believe that we should formulate and implement stractural adjustment programs of some sort that can revive the economy at the same time arranging with the people we owe money some acceptable terms of repayment that we would at all cost try to meet. It will be very difficult but is the only way that we can creat a better future for our kids. We don't need decisions that will allow individuals to amass wealth at the expense of the country now or in future.