The neo-liberal trading system and debt domination are obvious bedfellows. The free market trade model is legitimising an economic order in which affluence is the privilege of a few, and globalised poverty is the common condition for the majority. The International Financial Institutions (IFIs) are forcing free trade and privatisation on the poor through heavy-handed ‘advice’ and trade conditions attached to debt repayments and new loans. ZIMCODD believes that more trade will not necessarily lead to less poverty, if for example, the profits go to a small group, or are transferred out of the country, or if products are produced under very exploitative conditions. Fair trade can unlock resources for development for indebted poor countries.
Why Public Debt?
Public debt is one of the major hindrances to the practical realisation of sustainable development and the full exercise of human rights. Indebted developing countries spend huge sums of their scarce national resources servicing debt at the expense of development projects and the provision of basic services such as health and education.
External Debt
This is debt owed to multilateral agencies such as the International Monetary Fund (IMF), the World Bank or the African Development Bank (ADB) and/or bilateral creditors such as other governments and companies.
Domestic Debt
This is debt owed to local agencies, banks or companies and the public through Treasury Bills, overdraft facilities and other instruments.
History of Debt in Zimbabwe
It is estimated that Zimbabwe inherited at least USD 700 million in external debt from the colonial government. Part of the inherited debt was accrued to fight against the liberation struggle and consolidate the exploitative and illegitimate government’s power. Apartheid-caused-debt amounted to USD 400 million when the government accumulated debts to ward off economic destabilization and later to redress the destruction caused by the Apartheid disturbances. The independent government’s external debt soared due to the inflows of balance-of-payments funds from multilateral agencies, which sponsored the Economic Structural Adjustment Programme (ESAP).
Debt as an Instrument of Control
In many countries like Zimbabwe, debt allows creditors to determine a country’s political, economic and social policy direction, thereby consolidating perpetual dependency and underdevelopment.
Illegitimate and Odious Debts
Debt becomes illegitimate when it is contracted by defacto or corrupt governments, outside the legal frameworks, and when there is no public consultation. Debt becomes odious if it is not used to benefit the people, but rather to repress them, such as colonial and Apartheid debts. In principle, countries of the North owe much more to developing countries than they are owed through multilateral and bilateral credits. The accumulation and concentration of wealth in developed countries is due to the exploitation, slavery and neo-liberal plunder of the people of the global South.
Why Debt Servicing is Immoral
Debt servicing reduces people to poverty. It is tearing down social safety nets, education, access to treatment for killer diseases and livelihoods. The interest payments that are made to service the external debts are larger than the state expenditures for social sectors. AFRODAD estimates that Africa pays USD 15 billion in annual unwarranted debt repayments every year! Unconditional debt cancellation can free millions of dollars for sustainable development and decent livelihoods.
Should Governments Continue to Borrow?
Conceptually, economic aid and borrowing are desirable but when such funding is tied to conditionalities then it is destructive. Governments should practice responsible borrowing which is transparent, accountable and channeled towards production rather than consumption.
Benchmarks of Trade
AFRODAD* estimates that Africa suffers leakages of nearly USD 60 billion in annual terms of trade losses. In this view, ZIMCODD strongly advocates for the implementation of the following benchmarks of fair trade;
• Pro-people domestic trade policies including significant government support systems for small-scale produces and transparent grading and pricing systems
• Improved market access for products of export interest to developing countries
• Substantial reduction and subsequent elimination of all trade-distorting subsidies in developed countries.
* AFRODAD’S Reality Check on Development Aid (2003)
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