Harare- The African Forum and Network on Debt and Development (AFRODAD) in partnership with its sister organisation, Zimbabwe Coalition on Debt and Development (ZIMCODD) says the government is scratching where it is not itching as it battles to service the accumulating debt, both from external and internal creditors. 

Official figures show that Zimbabwe’s arrears are now exceeding the actual debts putting the nation on a record of failure to service its debts. The first country post-COVID-19 pandemic to default on debt servicing in Africa was Zambia, but due to political and economic reforms, it quickly got a bailout from the International Monetary Fund and World Bank.

During its conference on African Debt and Development held on the 16th of August, the Organisations said the elephant in the house acting as a barrier to debt servicing is a lack of debt transparency and a lack of reforms, particularly concerning Zimbabwe Democracy and Economic Recovery Act (ZIDERA).

According to ZIMCODD, the problem that is resulting in the failure to service debts is a governance problem. There is no transparency on what the nation owes to foreign debtors. As of 31 December 2021, the nation had an external debt of circa US$14.5 billion and by June 2022, the debt was reduced to US$13.153. Surprisingly, the government did not communicate to have been paid such an amount of debt servicing putting doubt on the credibility of its figures. Of more interesting are other reflections according to AFRODAD research which says only up to US$60 million was paid during that period as debt servicing contradicting the US$1.2 billion  debt  reduction.

That gives a headache to the actual figure that the nation owes to external creditors.  The latest mid-term budget released shows that Zimbabwe has an external debt amounting to approximately US$13.153 billion while international lenders like IMF and World Bank estimate the external debt to be around US$19 billion. Conversely, AFRODAD and ZIMCODD estimated that the debt has already surpassed both US$13 billion and US$19 billion due to the lack of a formal protocol by the government when borrowing putting it around US$22 billion.  That has led an independent Economist, Gerald Macheka to put the debt figure above US$25 billion due to these discrepancies.

On the domestic front, debt according to official data has accrued to ZW$1.3 trillion as of June 2021 and it is not clear if the government haven’t borrowed between that period to June 2022. The huge debt is due to fiscal indiscipline as the government continues to bite what it cannot chew in its battle of financing campaign projects. Due to a lack of debt transparency, the debt might even be around ZW$4 trillion due to some hidden debts which are not disclosed but known that they are there with some clothed in the name of donations, especially from China. History shows that China doesn’t offer free cows.

The government’s problem is not that of borrowing as no country survives without borrowing but Zimbabwe has a spending problem that is not subject to the highest law of the land. Government has a tendency of borrowing sidelining the parliament. It exceeds the budget allocated by the parliament without the parliament’s approval contributing to the national stock debt. It has a system of bypassing the systems of accountability. Constitution clearly states that the parliament should approve any spending by the government. 

The graph below shows Stock of Domestic Debt end June 2022 (ZWL$ million) (Preliminary figures): Source-Treasury

“We don’t have a debt problem but a political attitude challenge towards how we look at our expenditure. We have a consumption problem,” AFRODAD said. 

The government, in the mid-term fiscal policy, blamed the Russia-Ukraine war and COVID-19 impacts on debt accumulation. However, the Grade 7 Logic tells that this is a big construction of reality as the debt was even there before these crises. The two crises just exacerbated the debt crisis. According to ZIMCODD, by 2019, before the COVID-19 crisis, about 17 countries in Africa were already at debt risk, with Zambia included.

ZIMCODD’s analysis of the 2018 Zimbabwe Auditor General report shows that the year president Mnangagwa took to power, transactions worth US$5.8 billion were made with financial irregularities ranging from unsupported expenditure, excess expenditure, outstanding payments to suppliers of goods and services, transfers of funds without treasury approval among other issues. This constituted about 82% of government expenditure for the year. 

The debt crisis continues to be the elephant in the room, restricting economic growth both at macro- and micro levels as it impedes access to low-cost and long-term financing necessary to support the desired medium to long-term growth. 

To address the debt crisis, the government has developed the Arrears Clearance, Debt Relief and Restructuring (ACDRR) Strategy aimed at restoring debt sustainability and has been hiring lobbyists and using the state media to propagate propaganda that there are political rooms currently being done by the Second Republic yet there are not. These debt strategies have been already there. In 2015, the government enacted the Debt Clearance Plan and in the NDS1, the government also set the debt clearance plan which is both failing to yield results. In line with the ACDRR Strategy roadmap, the African Development Bank’s President, Dr A. Adesina has been in the country where he agreed to champion the debt resolution and re-engagement process and is expected to coordinate and chair the forthcoming High-Level Debt Resolution Forum. However, for this to bear fruits, there is a need to reform how the government manages the public finances and requires a high level of transparency.

One of the ways government looks forward to servicing its debts is the Highly Indebtable Poor Countries (HIPC) route which gives Zimbabwe a better way of servicing its debts. However, it requires the country to establish a sound record of reforms, not propaganda, not hiring lobbyists. it also requires inking of projects that were funded by the IMF and World Bank, a major hurdle for the country due to mismanagement of funds.   Zimbabwe is well known for borrowing funds to fund project A and then channelling them to Project Y and Z.

However, ZIMCODD is of the concern that if various figures are put concerning the Zimbabwe debt, how much is Adesina going to ask for? Also, the debt crisis that Zimbabwe is in requires a debt bail-out from multilateral and international lenders where the United States and the United Kingdom are actively involved, the nations who are calling for political and economic reforms in Zimbabwe. So, to whom is Adesina going to ask for a bailout? This is where the issues to do with transparency and reforms in line with ZIDERA come to play. 

The fact that African Union and SADC are failing to rebuke political and social injustices purported by the Second Republic, issues to do with corruption and democracy, will be very surprising to learn that Adesina has and will rebuke President Mnangagwa for that. Zimbabwean political atmosphere will make it harder for Adesina to make a credit bailout for Zimbabwe or even achieve a meaningful footprint if not political reforms remain idle.

Official reports from the government and IMF indicate that Zimbabwe lost a minimum of US$1.2 billion to corruption. If that is corrected, Zimbabwe can service its debt within a space of 10 years using the government statistics.  This is where ZIDERA and ZIMCODD shake hands.

 “Zimbabwe should invest more in debt audits and independent debt audits for credibility,” ZIMCODD said. 

In 2019, China accused Zimbabwe of underestimating loans provided by the Chinese creditors after budget figures released showed that major ally Beijing ranked poorly on the list of Harare’s foreign donors. Zimbabwe’s authorities have a history of quietly racking up foreign and local debt without the approval of parliament and the funding discrepancy has raised eyebrows that the Treasury is hiding figures. 

A closer look at ZIDERA and Debt Crisis

“It is the policy of the United States to support the people of Zimbabwe in their struggle to effect peaceful, democratic change, achieve broad-based and equitable economic growth, and restore the rule of law,” ZIDERA Act reads

ZIDERA (Zimbabwe Democracy and Economic Recovery Act) was first enacted in 2001, after violent land takeovers from the White farmers, disputed and violent elections as well as the country’s involvement in the DRC war. In summary, the law demanded that the Zimbabwe Electoral Commission be replaced by a new commission chosen by all parties in Parliament, that the military play no role in election campaigns, equal access to State media for all participating parties, and that the ZEC releases both the provisional and the final voters’ rolls ahead of the poll.

According to ZIDERA, a cancer that is eating up Zimbabwe’s economic prowess is the abuse of human rights, corruption and lack of rule of law, assertions that the Zimbabwean government disputes. Corruption is cancer that eats away at a citizen’s faith in democracy and diminishes the instinct for innovation and economic growth.

However, despite the government disregarding any human rights abuses, corruption and lack of rule of law, ZIDERA is backed by tangible examples. Since the first elections were held after the formation of the opposition party in Zimbabwe in 1997, elections carried out were bloody with a lot of activists losing their lives for practising their democratic rights. ZANU PF supporters and state machinery (security forces) have been on record butchering opposition supporters and opening live firm arms to the masses. Dictatorship and lack of democracy had forced the country’s leadership to turn to China for rescue.

Regarding rule of law, there are several occasions where the ZANU-PF-aligned members have broken the law but were left scot-free. On the other hand, opposition parties, especially from the Chamisa-led wing have been refused court bails with the current CCC chairperson being denied a bail, though it is a right aligned with the highest law of the land. Some members of the opposition wing are intimidated and their rallies banned by security officials while ZANU-PF members carry out theirs without any hindrance. 

On the corruption side, billions of US dollars have left the country through illicit trade suffocating the veins and arteries of Zimbabwe’s escape routes. This is backed by the ranking of Zimbabwe by the global anti-corruption coalition, Transparency International, which continues to present no difference between the Robert Mugabe government and the current Emmerson Mnangagwa-led government despite President Mnangagwa promising zero tolerance for corruption. 

“Corruption remains the major source of some of the problems we face as a country and its retarding impact on national development cannot be overemphasized,” Mnangagwa told a joint sitting of the country’s two houses of parliament.

“On individual cases of corruption, every case must be investigated and punished under the dictates of our laws. There should be no sacred cows. My government will have zero tolerance towards corruption and this has already begun.”

However, statistics on the ground are a different story. The Afro Barometer Survey of 2020 showed that corruption increased by 60% between 2018 and 2019, the years in which the second republic promised a raft of measures. 

Law enforcement has been on a ‘catch and release’ circus with fingered corrupt officials- with no genuine arrests and imprisonments occurring. In 2019, Tourism Minister Prisca Mupfumira was fired after she was accused of criminal conduct during her time as Minister of Public Service resulting in the loss of US$95 million at the National Social Security Authority. Zimbabwe’s Health Minister, Obadiah Moyo, was discharged in June 2020 after allegations that he illegitimately granted a US$60 million contract to a sinister firm that sold the government COVID19 PPE at inflated prices in what is known as the ‘DRAX scandal.’ 

Both former ministers walked away scot-free.

Relationship between ZIDERA reforms and Debt crisis

The relationship with debt settlement comes into play because the nations that imposed sanctions on Zimbabwe such as the United Kingdom, EU and USA are very influential in how the International Monetary Fund, World Bank, African Development Bank itself, the African Development Fund, the European Bank for Reconstruction and Development the Multilateral Investment Guaranty Agency and other international lenders conduct their operations. With their influence, it is impossible for these bodies to organise a financial bailout for Zimbabwe without political and economic reforms. It is against this background that ZIMCODD said the government is scratching where it is not itching. 

According to research, Zimbabwe lost over 50 relationships with correspondent banks between 2008 and 2017 as they engaged in de-risking as a result of the sanctions and global noncompliance with anti-money laundering legislation. Therefore, without addressing democratic reforms, Zimbabwe is likely to continue being in a debt trap. 

With reforms alone as ZIMCODD, AFRODAD and the West calls for, Zimbabwe can even alone service its debt crisis without much external interference as the nation is not starved of resources.  However, without reforms, economic growth will remain a nightmare, so as debt servicing. Zimbabwe has a power crisis for example and this means it cannot produce more. Investments in the energy sector are not an easy task because every surplus obtained will be channelled to debt servicing.