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Stakeholders Call for an Official Audit of Zimbabwe’s External Debt
1 July 2009
Zimcodd - http://www.zimcodd.org.zw
Stakeholders met yesterday in Harare to discuss Zimbabwe’s external debt, which threatens the welfare of its citizens who have been ravaged by a deep social, economic and political crisis. The Zimbabwe Coalition on Debt and Development (ZIMCODD), a coalition of institutions and individuals focusing on social and economic justice, convened the meeting under the theme “The Economy in Transition Dialogue Conference: Towards a Sustainable Public Debt for Zimbabwe”.
The main objective of this initiative was to give various stakeholders including the government an opportunity to deliberate on the country’s current unsustainable debt situation, and collaborate on possible means of effectively managing it in the future. Amongst the stakeholders present was the Minster of Finance, Hon. Tendai Biti who was invited to advise participants of government’s strategy for dealing with Zimbabwe’s public debt in the short to medium term.
Since the government was sworn in early this year, it has launched the Short Term Emergency Recovery Programme (STERP) to address key issues of economic stabilization. The total resource requirements for the key priority areas outlined in this programme are in excess of USD 8 billion. Unfortunately, the country is not in a position to generate all these resources internally in the short term.
In order to mobilize external resources, the government is actively engaging donor countries and multilateral agencies to reopen external lines of credit, provide grants, and make investments. In their view, the only obstacles to normalizing these relations are the sanctions imposed by the West. Some of these sanctions specifically prohibit voting for the extension of any loans, credit or guarantee to the government of Zimbabwe, or cancellation or reduction of indebtedness of the country to any creditor.
Whilst it is looking forward to receiving external assistance Zimbabwe is saddled with an unsustainably high level of external debt, the bulk of which is owed to multilateral funding agencies. Officially opening the conference, the Minister of Finance said Zimbabwe’s external debt which stands at US$4.6 billion as at 30 June 2009 is unsustainable and detrimental to economic recovery. “At the moment Zimbabwe has no capacity to repay its debt and will not pay”, he said. “Most of Zimbabwe’s external debt stock is in interest owed in arrears to the World Bank, the IMF, and the African Development Bank. The country’s indebtedness...has continued to increase largely due to the recapitalization of interest whilst arrears are escalating due to continued defaults on principal amounts falling due.” Analysts assert that if the debt is not reduced in a, “consistent and systematic fashion, it could balloon to US 7 billion by 2011. New credit lines could also add to this figure significantly.
In response to the government the IMF has announced that there are many outstanding issues which need to be resolved before it and other multilateral funding agencies resume financial assistance to Zimbabwe. Key amongst these issues is the clearance of arrears. The institution has however, agreed to resume technical assistance to targeted areas. It since been reported that the government has announced it would resume debt service on a quarterly basis, as part of these negotiations to reopen these credit lines.
Sarah Bracking of Manchester University presented the findings of a study done in collaboration with Professor Lloyd Sachikonye of the University of Zimbabwe, which gives an incisive historical review of Zimbabwe’s debt profile from the late 1980s to the present day. She also made recommendations on how Zimbabwe can deal with odious debt in view of the study’s findings which included options of a campaign for write off or reduction, and alternative sources of development finance.
Another speaker, Vitalice Meja of the African Forum on Debt and Development (AFRODAD) spoke on the ‘illegitimacy’ of IFI lending, as a critical examination of the role of multilateral and bilateral lenders in the creation and growth of odious and illegitimate debt. In his view, Zimbabwe should call for the total and unconditional cancellation of its IFI related debts given the failure of the policy and advice that the World Bank prescribed in the past. He called for the launch of multiple initiatives at international and local level such as the institution of transparent and accountable loan contraction process with clear roles for parliament and civil society and reform of the IFIs to improve on their effectiveness.
Zviko Chadambuka of the Zimbabwe Lawyers for Human Rights (ZLHR), who made a presentation on “The Legal Framework of the Public Loan Contraction and Debt Management in Zimbabwe” noted how the current loan contraction policies of the country give almost exclusive and sweeping discretionary powers in the contraction of new loans to the President and the Minister of Finance. According to him, in the most ideal situation the process by which Zimbabwe agrees to take on loans needs to be opened up to scrutiny by citizen groups and their representatives in Parliament to avoid the build up of unsustainable debts. He said that the current constitutional reform process was an opportunity for civil society to lobby for the inclusion of inclusive and transparent loan contraction processes in the new constitution.
Speaking in his individual capacity, Senator Obert Gutu of the MDC T said that it is imperative for the inclusive government to urgently institute a debt audit. He questioned the logic for the government to ask for US$8 billion to jump-start Zimbabwe’s economy whilst avoiding the issue of past debts. He also said that the IFIs had abdicated their fiduciary responsibility to ensure that past loans were properly used. “If the World Bank breaches this fiduciary duty it should be held liable and the debtor nation must be entitled to challenge the odious debt at international law,” he said.
Njoki Njehu of Africa Jubilee South took the meeting through a detailed outline of official and citizens’ debt audit processes using existing precedents. She also profiled the North-South campaign against illegitimate debt and made recommendations to fit the Zimbabwean context on conducting a Citizens’ debt audit.
The conference called for a comprehensive debt audit which will establish among other things, the amounts borrowed, interests accrued, amounts repaid, conditions of lending, reasons for borrowing, use of funds borrowed, loan beneficiaries, historical and ecological aspects of the debt. The findings of the debt audit would form the basis of the case for either repudiation or cancellation. The debt audit will help unlock resources currently earmarked for debt servicing and redirect them towards health service delivery, education, water and sanitation among other social services which are in dire state.
ZIMCODD has been campaigning for a Citizens Debt Audit involving a broad base of civic organisations. At the Peoples’ Convention held in Harare in February 2008, civil society organisations and social movements adopted a resolution on the right of the people of Zimbabwe to refuse repayment of any odious debt as part of the broader Peoples’ Charter.
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