Should Zimbabwe declare itself rich or poor?
By Gift Phiri 25 July 2010:
HARARE - Zimbabwe's plan to get its staggering US$7 billion debt written off under the Heavily Indebted Poor Countries (HIPC) initiative, a debt relief programme managed by the International Monetary Fund and the World Bank, has sharply divided opinion.
The move, the latest in a series of steps to manage the ballooning debt by the one and half year old inclusive government, will enable the bankrupt and poor southern African country, isolated from international capital over the past decade, to once again tap international capital markets again.
Zimbabwe's unity government, formed last year by bitter foes President Robert Mugabe and Prime Minister Morgan Tsvangirai to end an economic crisis, has failed to attract much-needed foreign aid, mainly due to the massive debts.
An IMF staff paper published last week detailing discussions with the Zimbabwean authorities in March, said neither the right economic policies nor the country's mineral wealth could immediately resolve the country's huge debt problem. Zimbabwe's bankrupt unity government has an external debt of US$7.145 billion and is currently in arrears of US$4.575 billion. The current arrears are blocking new lines of credit.
But critics have called for a full public audit of the country’s US$7.145 billion debt burden to assess its legitimacy amid concerns this money could have been plundered from the treasury.
Analysts have described Zimbabwe as a "Highly Robbed Poor Country" rather than a "Heavily Indebted Poor Country" and have called for the restitution of the country’s stolen assets, accusing the central bank of playing a key role in the accrual of the staggering debt.
"There has been much irresponsible lending," said Rutendo Hadebe of the Zimbabwe Coalition on Debt and Development.
Added Ingrid Naess-Holm of African Debt and Development: "Zimbabwe should find other solutions before adopting HIPC. Zimbabwe could qualify as a HIPC, (but) measures such as mandatory privatisation of state enterprises, adopting an economic adjustment programme and other such pre-requisites could be more harmful to the economy."
The HIPC Initiative is a long, fraught process which is tied to a whole range of sometimes controversial macroeconomic policy conditionalities, Naess-Holm warned. The average time for completion of the programme has been six to seven years, so debt cancellation takes a long time.
But Eric Bloch, a prominent economist differs. “What viable option do they have for the country to deal with this huge debt?” he asked.
Bloch said the debt relief should free up resources for Zimbabwe to spend on rebuilding an economy shattered by a decade of hyperinflation, conflict, and isolation which left infrastructure in ruin and a nation traumatized.
HIPC status would give Zimbabwe access to the IMF's Poverty Reduction and Growth Facility, which provides loans to low-income countries at subsidised rates. Zimbabwe would also be able to access cash from the World Bank. But some people did not want Zimbabwe classified as a heavily indebted poor country saying the country was rich were it not for sanctions.
Finance minister Tenda Biti has said the US$7 billion debt was stifling economic recovery, and without the debt overhang, Zimbabwe's economy would have been growing by 15 percent annually.
Zimbabwe’s economy grew by five percent last year for the first time after a decade of debilitating negative economic decline. Senior government officials say the IMF had proposed a buyback of outstanding government debt that had been in default since the 1990s, with the rest of the remaining debt set to be cancelled under HIPC.
Economists acknowledge the divergent views on the debt clearance strategy, but said seeking HIPC status - which would require sweeping reforms and setting firm performance targets - was the best option for Zimbabwe.
To qualify for HIPC status, a country's debt has to be considered to be beyond its ability to repay from its own resources, and then commit to sound economic management and institute broad reforms. President Mugabe's Zanu (PF) party does not want Zimbabwe classified as a heavily indebted poor country saying the move will facilitate foreign interference in the country’s economic and political affairs, as well as project the country as an economic basket case.
Zimbabwe Congress of Trade Unions (ZCTU) president Lovemore Matombo, said: “There is no country in the world that has developed under IMF and World Bank programmes.” He highlighted the problems of privatisation, retrenchments and cutbacks on social spending which characterised ESAP (economic structural adjustment programme) in the 1990s and warned that they were part of the conditionalities under HIPC. “There is no difference between ESAP and HIPC and inviting HIPC in Zimbabwe is inviting cancer,” Matombo said.
Chris Mutsvangwa, Zimbabwe's former ambassador to China said Zimbabwe could use its mineral resources to clear its debt, capitalising on the current international demand for minerals and did not need to be declared a HIPC. But economists and the IMF say the much vaunted mineral wealth in Zimbabwe was not much in real terms and could not pay off the country's staggering debt./the Zimbabwean |
