Proposals to avert future debt crisis

Saturday, 10 July 

THE current constitutional reforms present an opportunity for the country to avert a future debt crisis by reforming Zimbabwe’s loan contraction and debt management framework, a pressure group has said. The Zimbabwe Coalition on Debt and Development (Zimcodd) said the constitution must stipulate that Parliament approves all borrowings and grants all guarantees.

Zimbabwe’s total debt is projected to grow to US$7,6 billion by the end of the year and Zimcodd says current constitutional reforms to replace the Lancaster House document should ensure that government consults before borrowing. It said that there “should be a provision that requires the government to consult civil society groups and project beneficiaries before borrowing from external sources to ensure that the development priorities outlined in loan agreements reflect the aspirations of the people.

“The coalition expects the constitution to foster more transparency in the loan contraction process by creditors and borrowers, who currently negotiate without the direct involvement of citizens’ elected officials in parliament,” Zimcodd said. It said citizens were liable for all debts through paying taxes. Zimcodd called for constitutional guarantees that would ensure the terms and conditions of loans must be published in the government gazette and national newspapers before contracts were signed. Parastatals and other government bodies have been criticised for contributing to the current high levels of sovereign debt.

“The coalition now expects the constitution to include this category of debts under strengthened provisions for enhanced supervision and scrutiny by parliament,” it said. “Periodic reports to parliament on loans and debts must be constitutionally binding on such entities and their respective ministries. “This will help to reduce the levels of public liability.”

Zimcodd said the constitution must stipulate limits on government borrowing and granting guarantees. “A ceiling must be placed on international loans on specific, sound economic analysis and considerations. “Borrowings must be limited to projects that are socially and environmentally sustainable, target poverty reduction goals and do not violate economic, social and cultural rights,” it said.

Zimbabwe is in desperate need of capital to kick-start the economic reconstruction meaning that it would accumulate more debt. According to the three-year Macro-economic Policy and Budget Framework, the country requires US$29,8 billion to finance its requirements in the three years up to 2012.-The Standard