Vol. 35, No. 6
Zimbabwe: Cancel the debt
Zimbabwe's external debt amounts to 163 percent of the country's gross domestic product. The IMF considers levels above 30 percent to be unsustainable for countries like Zimbabwe with weak policies and institutions. In 2009 Zimbabwe spent 48 percent of its revenues servicing debt, according to the IMF Debt Sustainability Analysis from July 2010. External debt is projected to grow to US$7.6 billion by the end of 2010, while domestic debt will increase to US$1 billion in the same period.
The Zimbabwe Coalition on Debt and Development (ZIMCODD) recently organized "Debtweek" on the theme "Responsible Lending and Borrowing to Guarantee Peoples' Social and Economic Rights." Debtweek took place in Zimbabwe's distinct context, marked by a decade of organized civil society's struggle against the challenges of a political, economic and social crisis of immense proportions now underscored by the country's growing indebtedness.
ZIMCODD notes a lack of transparency, accountability and inclusiveness in Zimbabwe's process of contracting and managing public debt, suggesting that internal mechanisms may have a significant impact on the debt crisis, both domestic and foreign. But the power structures and policies of the international financial institutions continue to exacerbate the problem as well. ZIMCODD calls for a democratic or rights-based framework for resolution of the current debt crisis. Their analysis and recommendations demonstrate well how far the debate about debt cancellation has come in the past 15 years. They wrote:
"To the creditors of Zimbabwe's external debt crisis: We call on creditors to take into account their own multilateral development commitments, such as the MDGs and international protocols that guarantee the social and economic rights of the people in dealing with the Zimbabwe debt. They must immediately introduce a moratorium on debt service to arrest the growth of interest payments and penalties on the debt which is unpayable because of the current state of the Zimbabwean economy. This should be followed by a Parliamentary audit of current debts. We also reiterate that debt relief programs such as the Heavily Indebted Poor Country Initiative (HIPC) are no substitute for total debt cancellation.
"To the Ministry of Finance: We welcome the recent signing into law of the Public Finance Management Act Chapter 22:19, which enhances effective and responsible economic and financial management by the government on a broad range of issues. However, our analysis shows that the Act has very little advantage over its predecessor where loan contraction and debt management are concerned. We therefore recommend the introduction of amendments which strengthen this specific area to ensure transparency, accountability and inclusiveness.
"The proposed amendments must ensure that Parliament is guaranteed meaningful participation in the loan contraction and debt management process. ... Parliamentary power must ... be improved by ensuring that it approves loan guarantees before they are given. Loans and their terms and conditions must be publicized in the Gazette and national newspapers before the contract is signed. Projects that are funded by debt must be subjected to constitutionally guaranteed citizen input and prior financial, social, environmental and poverty reduction analysis. Loans for projects that violate economic, social and cultural rights must be barred. The functions of the newly created Debt Management Office (DMO) must also be explicitly captured in the Act.
"Ultimately, we urge the government of Zimbabwe to convene a conference with its creditors to discuss a realistic assessment of the country's debt sustainability under the prerogative of a fresh start for Zimbabwe's economy.
"To the Parliament of Zimbabwe: We encourage Parliament to establish a Public Debt Commission and conduct an Official Debt Audit. There is need for an audit of all Zimbabwe debt to inform the future debt strategy. This commission should utilize the doctrine of odious debt, and recommend the repudiation of any past loans which fall in this category. Any contracts and agreements that involve such debts and liabilities should therefore be amended or cancelled. Relevant, contextually appropriate changes to debt management policies will be informed by a debt audit. We also encourage Parliament to build its capacities in issues of public finance management so that it avoids rubber stamping loan proposals with carrying out due diligence, in preparation of its enhanced oversight role in this area."
For more information see ZIMCODD's website.