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This article participates on the following special index pages:
New Constitution-making process - Index of articles
for improved debt management in COPAC's draft constitution
African Forum and Network on Debt and Development (AFRODAD)
June 30, 2012
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reform process in Zimbabwe has opened up immense opportunities
for the country to create a new framework for sound economic management.
An area where this transformation is urgently needed, and will be
greatly felt is public finance management, particularly in administration
of public debt. An analysis of the public finance framework of the
draft using various benchmarks for sound debt management shows that
the proposed draft has some improvements on the current constitution
in terms of enhanced accountability, transparency and inclusiveness
in the loan contraction and debt management process, with scope
for improvement. This will benefit citizens, who ultimately owe
the public debt and pay for it through the taxes they pay, as well
as suffer its negative impacts in human development terms when it
state of play with Zimbabwe's external public debt
of the day is seized with implementing various programmes targeted
at economic recovery, since it was sworn in 2009. Currently, they
are focusing on the Medium Term Plan (MTP), which needs approximately,
US$9 billion total investment to meet its growth and development
targets between 2011 and 2015. Prior to that there was the Short
Term Economic Recovery Programme (STERP), whose total resource
requirements were in excess of US$ 8 billion. At the time STERP
was in force, the Finance Minister said US$ 45 billion is needed
to get the country back to its peak level of 1996-971. On the other
hand, the African Development Bank (AfDB) also says Zimbabwe needs
an estimated $14 billion for rehabilitation and upgrading of infrastructure.
For various reasons government does not have the capacity to generate
adequate resources internally to activate these programmes, hence
the need for external support in the short to medium term.
Zimbabwe owes bilateral and multilateral creditors various amounts,
which are beyond its internal capacity to repay at present. The
external debt position is projected to grow to more than US$8 billion
this year (118% of GDP). The Ministry of Finance (MoF) is currently
engaging its creditors in a process of verifying actual amounts
owed by Zimbabwe, so this figure should be put in its proper perspective.
Generally, the country has been in default on its external obligations
for the greater part of the last decade. The bulk of this debt is
therefore made up of interest and arrears. Creditors have insisted
on repayment of outstanding arrears and implementation of specific
reforms before Zimbabwe can receive debt relief and more aid. This
means that the unserviceable debt stands in the way of full economic
recovery of the country, let alone investments in infrastructure
and social sectors. To address this problem, the government of Zimbabwe
(GoZ) launched the Accelerated Clearance, Debt and Development Strategy
in March 2012 for a debt resolution aimed at inclusive growth, job
creation and poverty reduction.
efforts however, GoZ had started borrowing again at non-concessional
terms, on projects which stakeholders deem to be of questionable
national benefit. The IMF in its report on the Article IV consultations
which ended on March 30 2011 raised concern with the fact that GoZ
was now going into non-concessional borrowing, which they say is
not affordable and could complicate future external arrears clearance.
According to them:
borrowing and guaranteeing of non-concessional loans by the government
has intensified debt distress. Zimbabwe is not likely to reach
debt sustainability even taking into account increased receipts
from the country's mineral resources and assuming a significant
strengthening of policies in line with staff.
with this borrowing have also come from Parliament. It is clear
from reports that the Legislature which ratified these loans was
not involved in the negotiation process. Furthermore MPs raised
concerns with the terms of these loans, as well as the use of Parliament
as a rubber stamping mechanism.
It is now increasingly
agreed that although external causes such as the lending policies
of creditors contributed greatly to the debt crisis in many African
countries, internal factors are equally important. Studies have
shown that the causes of this problem are also attributable to poor
debt policy, a weak institutional and legal framework and lack of
accountability, transparency and inclusiveness of the involved institutions
in the loan contraction process. Part of the policy and institutional
framework for debt management is captured in the constitution; hence
the important link between such concerns with the current process
to amend the country's supreme law.
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