OPINION: Debt: Give me freedom or death

05 Jul, 2015 - 00:07 0 Views

The Sunday Mail

Capital is the biggest coward, as the popular saying goes. And debt is one of the ogres that easily scares this coward to take to its heels!

GREECE today makes history by voting in a crucial plebiscite to decide on whether or not to accept bailout conditions dictated by its multilateral lenders; a “yes” or “no” decision which also determine whether Greece will stay or leave (Grexit) the now not so pretty eurozone.

The south-eastern European country, whose motto, interestingly, is “freedom or death,” has already made history also by becoming the first developed country to default on an IMF loan.

This comes five days after debt-ridden Greece failed to pay €1,5 billion which was due to the IMF, effectively becoming unable to receive further financing from the multilateral lender.

Greek is also the first country to miss an IMF repayment since Zimbabwe in 2001.

This is happening at a time when our very own Parliament is in the process of establishing the Public Debt Management Act.

The objectives of the Act are to ensure that Government’s financing needs and its payment obligations are met at the lowest possible cost over the medium to long term, with a prudent level of risk, and to promote development of the domestic debt market.

The House of Assembly last Tuesday debated this important bill on the backdrop of a report that had been presented by the Parliamentary Portfolio Committee on Budget and Finance.

The committee highlighted a very important point from members of the general public that Government should not seek to contract more debt without the approval of Parliament, as it is already burdened by current debt.

According to the 15-Point Debt Resolution Strategy, Zimbabwe’s total public and publicly guaranteed external debt was estimated at US$6,9 billion at the end of 2013. Of that, US$5,5 billion was already in arrears. It is also disappointing to note that a further US$1,1 billion is constituted by penalty interest fees.

Interest is accumulating as we speak.

While moderate levels of debt are believed to have a positive effect on economic growth and development, the opposite happens if a very large debt stock is incurred.

In debating the bill last week, Mr Eddie Cross argued that “our debt is not that massive”. The thresholds used to analyse debt, however, prove beyond doubt that our debt is massive and unsustainable.

Using the 2013 statistics, we will see that the ratio of debt to exports was 157 percent, against the acceptable standard of 100 percent. The debt to GDP ratio was also 54 percent, as opposed to the acceptable threshold of 30 percent.

This partly explains why we are experiencing this liquidity crisis, as nobody is willing to lend to a country with all these arrears.

It also explains the high interest rates, as those that choose to lend to us also put a high risk premium. Again, it explains the low FDI to Zimbabwe compared to regional peers. You see, foreign investors often avoid countries with a debt situation such as ours, because they fear that taxes may be increased in the future to repay obligations.

Capital is the biggest coward, as the popular saying goes. And debt is one of the ogres that easily scares this coward to take to its heels!

Then we have sanctions, that many still think play no role in the economic situation we find ourselves in.

Take Honourable PD Sibanda, for instance, who also said in Parliament: “The debt, rather than sanctions, is actually one of the major reasons why we find ourselves in the situation that we are in.”

This is irrespective of the fact that were it not for economic sanctions imposed on Zimbabwe, this country would have dealt with its debt crisis long back.

Doesn’t the Zimbabwe Democracy and Economic Recovery Act unequivocally instruct representatives of the United States in multilateral institutions to “oppose and vote against … any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any financial institution”?

US representatives are further instructed to oppose and vote against any extension of any loan credit or guarantee to Zimbabwe.

Voting is not a problem to the US as it has the biggest voting quota.

Interestingly, or is it hypocritically, the same Zidera says it seeks to “support the people of Zimbabwe in their struggle to effect . . . equitable economic growth.”

How can we expect any meaningful economic growth and development when our wings are apparently clipped?

It boggles the mind.

Against this background, if it can be accepted that sanctions caused this unsustainable debt crisis, and that debt crisis partly explains the situation we are in, then transitivity will tell us that sanctions caused the absurd economic situation in the country.

I was also touched by Ms Priscilla Misihairambwi-Mushonga’s contribution to last week’s debate in Parliament.

She pointed out that part of our current national debt is inherited from the Ian Smith regime, which borrowed to acquire weapons of mass destruction to obliterate the sons and daughters of the soil who were fighting to take back their land.

She argued: “Some of us do not believe that (we) have a responsibility of paying a debt that was taken on by the Smith regime as it killed my brothers and sisters.”

These are some of the emotional issues that we are faced with as we seek to decisively leave behind the era of unsustainable debt and move towards sustainable economic growth and development.

The Finance Minister, in the same debate, disagreed with the Committee on Budget and Finance’s recommendation that Government, especially all quasi-Government institutions, should publish their liabilities in local newspapers for transparency purposes, arguing that it is “an expensive exercise”.

This is where we should learn to embrace new technology by thinking along the lines of publishing such records online, in downloadable excel sheets.

It is important that the country urgently deals with its debt situation through expeditious and vigorous implementation of the already established policies and appropriate legislative reforms.

Already we have brilliant strategies in policies such as ZAADDS, the 15-Point Debt Resolution Strategy and various legal reforms in the pipeline.

The persistent defaulting and rolling over of our external debt will continue to seriously affect our credit rating, compromise expenditure on critical social spending (including rights ascribed in the constitution), among other things.

Zimbabwe is a very rich country, resources-wise, whose potential can be fully realised when we effectively deal with the debt situation.

What must be also loudly underscored is that sanctions must go.

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