The Sunday News
Ngonidzashe Chiutsi Business Correspondent
ZIMBABWE is likely to struggle to offset its $7 billion foreign debt amid revelations that the default rate has reached 80 percent, a Government official has said. Speaking at a Reserve Bank of Zimbabwe (RBZ) Debt Assumption Bill public hearing in Bulawayo last week, Ministry of Finance and Economic Development’s debt expert Mr Cornilious Deredza said Zimbabwe had defaulted payment of about $7 billion that it owed to international institutions.
“Zimbabwe has about $7 billion foreign debt and $1,2 billion domestic debt. The domestic debt is not in a crisis situation and the Government has not defaulted on paying the debt. But on the foreign debt over 80 percent of that $7 billion is in arrears and we are unable to pay,” Mr Deredza said.
He, however, said a number of countries in the Southern African Development Community (Sadc) region were also facing difficulties in clearing their debts.
“Zimbabwe is not unique in this experience and it is a late comer. Zambia, Mozambique and other countries in Sadc, Economic Community of West African States have been defaulting on foreign debt. They went through what is called Highly Indebted Poor Countries. The creditor countries overseas have seen more than what they have seen in Zimbabwe with this problem,” he added.
He reiterated that a debt clearance plan was under way to ensure that the Government clears its huge debt.
“There is an arrears clearance programme and the Minister of Finance is engaging the creditors such as the IMF, World Bank, African Development Bank (AfDB) that we owe about $1,9 billion on how to clear this debt,” said Mr Deredza.
Speaking at the same event, Parliamentary Finance and Economic Development Committee chairman Mr David Chapfika said the RBZ Debt Assumption Bill, once turned into law, would resolve the debt issue.
“The Debt Assumption Bill seeks to operationalise the setting up of the debt management office. Once you give us your input and when we debate it in Parliament and is approved and signed by the President it becomes an Act of Parliament,” said Mr Chapfika.
Economist Christopher Takunda Mugaga told Sunday Business recently that the major reason why Africa’s economies had remained stunted was due to debt owed to European countries and multilateral institutions such as the IMF, World Bank and G8.
“One of the major traps of African development is debt and normally it manifests in aid. Once the aid is extended to Africa, it’ll continue pushing Africa’s economy downwards because they’ve to commit to paying the debt and this will compromise sustainable development and also compromise the credit rating of nations, once a country fails to pay those debts,” said Mr Mugaga.
He said the debt trap that African countries were in was denting efforts to eradicate poverty on the continent, as most of the money was used to service debt.
“Africa’s debt crisis will continue compromising development in terms of Gross Domestic Product growth and in terms of eradicating poverty out of Africa. We see some lines of credit being extended to Africa on certain conditions and some of the conditions are unfriendly,” said the economist.
Mr Mugaga said the crisis was more pronounced in countries whose national budgets depend on aid like Malawi.
