Zim's new debt plan welcome

HARARE - Zimbabwe's plan to unveil a new debt strategy aimed at reducing the country’s $10 billion external debt is not only commendable but is also a prerequisite for the country to access new financing in order to meaningfully contribute towards the attainment of accelerated, inclusive and sustained economic growth and poverty eradication.

Finance minister Patrick Chinamasa last week said the country was working on a self-financing scheme that will see Zimbabwe first clearing its $1,8 billion arrears to the International Monetary Fund, the World Bank and the African Development Bank.

Chinamasa said the country would — once they clear their arrears — work, between now and November, to come up with a new financing programme on the basis of which they hope to get financing to support key sectors which they hope may have a transformative impact on Zimbabwe’s economic recovery.

The Treasury boss noted that the country’s financing programme will be able to fund various economic sectors such as agriculture, mining and manufacturing, and build the country’s capacity to pay its debts both past and current.

We hope that the Zanu PF-led government will stick to this plan — our only hope for the country to exit the debt problem that has been stifling economic growth over the past 16 years.

Both local and external statistics show that Zimbabwe is a highly indebted country and has — for over a decade — failed to service its debts. This default has resulted in the accumulation of arrears to the country’s creditors amounting to over $5,5 billion.

We are all too aware of the adverse impact of the arrears situation on most of the country’s external official debt has had, translating to lack of balance of payments and budget support.

For the private sector, perceived country risk had made contracting critical offshore credit facilities difficult and expensive, further compounding financial sector illiquidity, hampering economic growth prospects, subduing export performance, and exacerbating growing import dependence.

As such, the clearance of these arrears will usher in opportunities to bring in long-term financing to promote growth and debt sustainability.

To achieve this feat, Zimbabwe must utilise a domestic resource mobilisation scheme to spearhead development.

We are a mineral-rich nation, but the government has not been realising much revenue from natural resources due to illicit financial flows, tax evasion, corruption and weak institutions.

The government needs to build strong economic institutions that will play a financial resource mobilisation role that can service debt. The economy needs growth, in order to enhance the country’s capacity to service its debts.

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