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

Posted by admin on July 6, 2009

By Stanley Kwenda
HARARE, Jul 6 (IPS) The Zimbabwean coalition government cannot afford to
repay debts incurred when President Robert Mugabe’s ZANU-PF was
ruling on its own and will not repay those debts.

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)