The Sunday Mail
In pursuit of Vision 2030, Zimbabwe is on an overdrive mission to transform itself by building an inclusive economy that benefits all its people through redistribution of wealth, creation of opportunities and jobs; thus, pulling millions of its people from the trenches of inequality and poverty.
Zimbabwe is, however, hamstrung by a huge domestic and foreign debt, which, if not managed properly, threatens the attainment of Vision 2030.
Zimbabwe’s total debt stands at US$17,7 billion, according to 2019 Budget by Finance and Economic Development Minister, Professor Mthuli Ncube.
The $17,7 billion debt is split into domestic debt (US$9,6 billion, which is 54 percent) and foreign debt ($7,6 billion, which is 46 percent).
Out of the US$7,6 foreign debt, about US$5,6 billion is in debt arrears, interest and penalties — a reflection of the country’s inability to service its debt.
Unlike domestic debt denominated in Zimbabwe dollars, foreign debt is in US dollars and its impact on the economy is huge, hence, the need to ensure that foreign debt issues are managed cautiously and that such obligations are honoured.
From the 2019 Budget, it was clear that the huge national debt is a sign of fiscal indiscipline on the part of Government, which was spending beyond its budgetary means and borrowing from domestic and foreign markets to finance both recurrent expenditures and other Government programmes.
Zimbabwe cannot transform itself into an Upper Middle-Income country by 2030, if it does not deal with its perennial debt problem, which affects Government’s ability to use national resources for economic development and supporting social services for its people.
While, we cannot divorce ourselves from the global financial architecture, aid, donors and freebies cannot help us achieve Vision 2030.
A peaceful and prosperous Zimbabwe can only be built primarily by our own resources.
But with a huge foreign debt liability of US$7,6 billion, Zimbabwe finds itself in between a rock and a hard place.
For example, if it fails to service its foreign debt, it will not be able to access the much-needed credit lines from multilateral financial institutions such as International Monetary Fund (IMF), World Bank (WB), African Development Bank (AfDB) and so on.
Debt management, therefore, becomes critical to any of our economic endeavours.
“Open for business” calls for a dramatic change “from the business as usual” approach.
Unless Government changes its attitude towards “spending and borrowing”, all policies articulated in the Transitional Stabilisation Programme (TSP) and ultimately Vision 2030 will not bear fruit.
Only when Government is able to manage its appetite to spend by limiting borrowing and spending within its means, can we talk of creating an environment conducive for attracting investment, and driving socio-economic transformation.
In order to rein in Government’s appetite to spend, which is critical to avoid excessive borrowing, we need strong oversight from parliamentarians.
Parliament represents the people and, as such, it should do its Constitutional job by ensuring that, it keeps the executive arm of the State — Government — under check.
Role of Parliament
The role of Parliament in the management of the economy and, in particular, public debt is clearly outlined in the Constitution, Public Debt Management Act and the Public Finance Management Act.
Parliament delegates its public debt management oversight through the Public Accounts Committee.
Section 300 of the Constitution allows Parliament, through an Act of Parliament, to limit State borrowing, public debt and State guarantees.
The Constitution is very clear that limits to public debt imposed by Parliament may not be exceeded without approval by Parliament.
Section 11(2) of the Public Debt Management Act provides that public debt may not exceed 70 percent of gross domestic product (GDP) at current market prices at the end of any fiscal year.
Government can only exceed the 70 percent of GDP statutory borrowing limits if they obtain a resolution from Parliament.
Parliament can only grant that resolution under special conditions such as occurrence of natural disasters and other emergencies requiring exceptional expenditure, where there is a large public investment project deemed by Cabinet to be prudent, or in case of general economic slowdown requiring fiscal and monetary stimulus.
The law is very clear on Parliament’s role in public debt management and ensuring Government maintains fiscal discipline.
To enable Parliament to exercise its oversight functions effectively, Section 300 (4) of the Constitution provides that the Minister of Finance must report to Parliament at least twice a year on the performance of public loans raised by the State.
What is of concern is that, notwithstanding the provisions of the law, Government has in the past violated public debt provisions with impunity and borrowed excessively without authority of Parliament and beyond the sustainable limits prescribed by law.
Parliament was too partisan, choosing to turn a blind eye to Government indiscipline usually for political expediency, which seriously affected the local economy.
Zimbabwe cannot attain Vision 2030 with a partisan Parliament.
Members of Parliament (MPs) should not be swayed by partisan party politics, interests and patronage, but by national interest.
Parliament has perennially failed to exercise its oversight role over public debt management as it allowed Government to serially breach the law — the Constitution, Public Debt Management Act and the Reserve Bank Act — without consequences.
It is hoped that going forward, Parliament will assume its oversight role effectively and ensure that Government borrowings are done lawfully.
Independent Debt Audit
Parliament should pressure Government to conduct an independent national debt audit.
Some economists feel the current figure of $17,7 billion could be understated since the debt accrued by parastatals, the central bank and other public institutions can be technically considered national debt as well.
This is why there is call for a comprehensive, independent and transparent national debt audit to ensure that the public debt is verified.
Zimbabwe has sufficient legal instruments to manage public debt.
What has been lacking in the past is fiscal discipline on the part of Government to borrow sustainably and to ensure that Government spends within its budgetary means, and that expenditure is not incurred arbitrarily.
Parliament has allowed Government to borrow unsustainably and sink the economy in the process.
Going forward, a national debt strategy is needed to ensure that Zimbabwe manages its public debt effectively and in a transparent manner.
Government, according to recent media reports, is considering borrowing externally to service its AfDB loans — such transactions should be scrutinised and sanctioned by Parliament.
Rule of law
Parliament should ensure Government abides by the law.
Rule of law in relation to public debt basically means Government is subject to and accountable to law and, as such, should observe and abide by international and domestic laws on public debt.
Government’s domestic borrowings in the past show Government’s failure to abide by the laws, which govern public debt in Zimbabwe.
Zimbabwe can only create a sustainable and inclusive economy that benefits all its people in pursuit of Vision 2030, if Parliament exercises its oversight role independently and effectively, without fear or political patronage.
Allen Choruma can be contacted on e-mail: [email protected]