Zim debt balloons to $9.9 billion

Zim debt balloons to $9.9 billion
Published: 04 July 2014
Zimbabwe's principal debt has ballooned by nearly 40 percent from $6,1 billion last year to $9,9 billion, Finance minister Patrick Chinamasa has said.

The lawyer-cum-politician yesterday said the country's total external debt stood at $8,9 billion as at December 31, 2013, which is 69 percent of its Gross Domestic Product (GDP), and the total domestic debt stood at $ 994 million, constituting eight percent of GDP.

"Zimbabwe's outstanding public and publicly guaranteed external debt, (including Reserve Bank's external debt), stood at $6,964 billion, representing 54 percent of GDP in nominal terms," he said.

"Of the total public and publicly-guaranteed external debt of $6,964 billion, $5,012 billion (72 percent) was public debt, while $1,356 billion (20 percent) was publicly-guaranteed debt and $ 596 million (eight percent) was RBZ debt," Chinamasa said.

The southern African country owes various bilateral creditors including the Paris Club and Non-Paris Club and multilateral creditors such as the African Development Bank  (AfDB), the World Bank (WB), the International Monetary Fund (IMF) and the European Investment Bank EIB among others.

According to Treasury, total external debt to multilateral creditors stood at $3,786 billion owed to Paris Club creditors and Non-Paris club, including China.

Total multilateral debt stood at $2,58 billion, owed to the World Bank ($1 billion), AfDB ($612 million), EIB ($280 million) and the IMF ($121 million).

Private sector external debt stood at $1,951 billion, constituting 22 percent of total external debt.

"Private sector borrowing has been steadily growing since 2009, and the sector is not in arrears," Chinamasa said.

The financial services sector had the highest borrowing, representing 37 percent of total borrowing. The agricultural sector borrowing stood at 36 percent while mining constituted 10 percent, distribution stood at eight percent and the manufacturing sector recorded five percent borrowing.

"The domestic debt currently sits at $1, 070 billion. RBZ domestic debt, which is being assumed by the government through the issuance of government bonds amounting to $754 million," said Chinamasa.

To date, government has assumed $200,4 million of the central bank's domestic debt.
Chinamasa noted that the country "needs to sort out perception issues" and "pursue policies that attract FDI (Foreign Direct Investment)".

The country, which has been struggling to access funds and technical assistance from international financial institutions because of longstanding arrears and policy disagreements, has been looking to reengage these institutions.

"Zimbabwe faces serious medium-term challenges and achieving sustainable, inclusive growth will require strong macroeconomic and financial policies, an enabling business environment, and normalised relations with creditors," the IMF recently said.

Chinamasa acknowledged the need for Zimbabwe to be in good standing with institutions such as China Development Bank, China Eximbank, the WB, AfDB among others.

"Improving relations with the World Bank and other financial institutions will allow Zimbabwe to access soft loans (long-term borrowing) at 0,75 percent for example over long periods to be able to embark on infrastructure development projects," Chinamasa said.

The Finance minister's comments on re-engagement come against the backdrop of the normalisation of relations between Zimbabwe and the European Union (EU) and some aid agencies, which had suspended assistance such as the Denmark International Development Agency (Danida).

Last month, the head of the EU delegation to Zimbabwe, Ambassador Aldo Dell'Ariccia said the bloc was committed to normalisation of relations.

"The EU remains committed to re-engaging with Zimbabwe and we have the evidence of the re-engagement in action," he said.

Economic analysts have said the government needs to be consistent in policy implementation.

Godfrey Kanyenze of Labour and Economic Development Research Institute of Zimbabwe recently said at a civic forum that government had fallen short on economic implementation.

"Government has made regular changes to economic programmes showing policy incoherence and inconsistency, and even reversals," he said.

Commenting on the imminent appointment by the IMF of a resident representative in Zimbabwe, Economist, John Robertson said the appointment will only be helpful if the country takes the advice from the IMF seriously and keep its promises but if the government "remains uncooperative which has been the government approach," then the appointment will not be helpful, Robertson said.
- dailynews


Latest News

Latest Published Reports

Latest jobs