ECONOMY: Zimbabwe Can’t Repay Loans; Insisting on 'Debt Strategy'

• by Stanley Kwenda (harare)
• Monday, July 06, 2009
• Inter Press Service

Zimbabwe’s finance minister, Tendai Biti, told debt cancellation campaigners at a conference that 'Zimbabwe does not have the capacity to pay the debt and we will not pay this debt.'

The minister was responding to growing calls from civil society organisations for a comprehensive debt audit. The organisations want the audit to determine the extent to which the country’s debts have become illegitimate and odious.

Debt becomes illegitimate when contracted by corrupt governments outside legal frameworks and when there is no public consultation. Debts become odious if they are not used to benefit the citizenry but rather to oppress them.

Civil society groups have demanded to know how the money was used before the debts are repaid.

Biti was speaking at a conference with the theme 'Economy in Transition - Towards Sustainable Public Debt for Zimbabwe', hosted by the Zimbabwe Coalition on Debt and Development (ZIMCODD) in Harare last week. ZIMCODD is a socio-economic justice coalition established in 2000 to facilitate citizens’ involvement in making public policy and practice pro-people.

According to the latest ministry of finance and Reserve Bank of Zimbabwe statistics, released on Jun 30, Zimbabwe is sitting on a total external debt of 4,6 billion dollars. Approximately 65 percent of these external obligations are in arrears.

To compound matters, Zimbabwe requires 8,4 billion dollars for its Short Term Emergency Recovery Programme (STERP), an economic blueprint launched by the government in April this year.

The huge external debt may extinguish whatever possibility exists of an economic recovery. Although the country is starting to register slight improvement in general economic performance, the huge debt stock remains an impediment.

Revenue collections have steadily risen from 4,7 million dollars in January to 28,7 million dollars in February, climbing further to 41,7 million dollars in March. The upward trend continued in April and May when 51,6 and 66,8 million dollars was collected respectively. These amounts are, however, a drop in the ocean considering the huge recovery work that the country needs.

The country’s industrial base still operates at 20 percent capacity while hospitals remain without essential equipment and medicine. The International Labour Organisation (ILO) puts the unemployment rate at 95 percent, a reflection of an economy which is far from ticking.

Against this background, Biti told the conference that it would be an ‘‘obscene’’ act for him to attempt repayment of debt.

He reiterated this in an interview with IPS: 'It would be obscene for me as the minister of finance to direct that we pay when 90 percent of our people are living below the poverty datum line, surviving on less than 20 dollar cents a day.'

The international financial institutions (IFIs), the International Monetary Fund (IMF) and the World Bank, have demanded the repayment of past loans before new lines of credit can be opened.

Biti responded that this kind of approach will only leave Zimbabwe with a 'debt overhang'. He suggested the formulation of a sustainable debt strategy which will enable the country to meet its obligations without abandoning national development.

'It is this debt strategy which will form the basis upon which government will re-engage the international capital market players,' Biti told IPS.

Biti further argued that Zimbabwe’s economic indicators now reflect that of a low income country and therefore Zimbabwe should qualify for the Heavily Indebted Poor Countries Initiative (HIPC). Countries that fall under the classification of HIPC benefit from exceptional arrears clearance support from the IFIs and the African Development Bank (ADB).

The civil society groups are arguing that the colossal debt that the country has accumulated is largely illegitimate. An example is the decision by the ZANU-PF government to send soldiers into the Democratic Republic of Congo (DRC), an unbudgeted expenditure.

In the book 'Zimbabwe‘s Plunge – Neo-Colonialism and Exhausted Nationalism', Patrick Bond and Masimba Manyanya wrote that Zimbabwe was using one million dollars a day to fight in the DRC.

Dakarayi Matanga, ZIMCODD director, told IPS that it is important to determine the legitimacy of public debt because it affects the realisation of people’s social and economic rights. 'We should analyse the legitimacy of the debt in order to separate what ought to be paid and what not. Public debt is one of the major hindrances to the realisation of sustainable development,' argued Matanga.

'Countries spend huge amounts of national resources servicing debt at the expense of development projects and the provision of basic services such as health and education,' he added.

Debt cancellation campaigner Sarah Bracking, a senior lecturer at the University of Manchester’s School of Environment and Development, argued for a debt audit. 'The Zimbabwean debt is politically related. Citizens did not take part when decisions to contract loans were made,' Bracking told IPS.

Betty Nyamupinga, a ZIMCODD debt campaigner, indicated to IPS that the debt audit should have a gender dimension. 'Let’s look at the impact of debt on gender. It is us women who are supposed to take children to hospital and give birth in a dilapidated facility but when decisions are made we are not consulted,' Nyamupinga stated.

Vitalis Meja of the African Forum on Debt and Development (AFRODAD) called for the total cancellation of debt. 'Let’s cancel the damn debt. (Repayment) is like being given a rope to go and hang yourself and you do just that,' said Meja.

Obert Gutu, a senator in the Zimbabwe parliament speaking in his own capacity, declared that by asking for loan payments, the IFIs are issuing a death warrant for Zimbabweans: 'They are simply saying, ‘we want you to die’.' END/IPS/AB/AF/SA/DV/IP/IF/CU/MH/TA/WO/SK/CW/09)

© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service