ZIMBABWE was saddled with a foreign debt of US$4,6 billion as at June 30 2009, the Minister of Finance Tendai Biti said this week.
Biti said the debt burden would place â€œsevere constrains on the economic recovery prospects if unmonitored, especially considering that the country requires over US$8,4 billion to revitalise the economyâ€.
â€œAs at June 30 2009 Zimbabweâ€™s total external debt including arrears amounted to US$4,6 billion.
Approximately 65% (US$3,2 billion) of these external obligations are in arrears,â€ said Biti
Biti was speaking at a conference organised by the Zimbabwe Coalition on Debt and Development (Zimcodd) held under the theme â€œThe Economy in Transition Dialogue Conference: Towards a Sustainable Public Debt for Zimbabweâ€.
Zimcodd is a coalition of institutions and individuals focusing on social and economic justice.
Â â€œThe resultant debt overhang will result in furthering the downturn trajectory in foreign direct investments â€” as investors fear implicit taxes on return on investments to meet the countryâ€™s external debt obligations, thereby diminishing prospects for recovery and growth,â€ Biti said.
Biti said government in conjunction with a number of developmental partners who include amongst others, the African Development Bank Group and the Macroeconomic and Financial Management Institute of Eastern and Southern Africa,Â will from this month undertake a comprehensive assessment of the current and future debt obligations with a view to formulate an optimal and sustainable debt strategy consistent with the broader macroeconomic policy objectives of the countryâ€™s national development strategy.
Biti said government was also in the process of validating its external debts with its creditors, which should feed into a debt sustainable framework.
Biti said the countryâ€™s economic indicators reflected that the Zimbabwe was a low-income country and subsequently qualifies for the Highly Indebted Poor Countries (HIPC) Initiative at the HIPC decision points.
â€œIf the debt remains unsustainable at completion point, the country will then be considered under the Multilateral Debt Relief Initiative (MDRI). There is however, a need to be reclassified under the World Bank and ADB lending criterion framework from middle to low income country,â€ he said.
Upon reclassification to a low-income country, Zimbabwe becomes eligible to benefit from exceptional arrears clearance support from the World Bank and ADB.
In this regard, Biti said government was in the process of increasing capacity at the Central Statistical Office with the assistance of developmental partners to ensure that it produces up to date national income and social statistics which will form the basis of the reclassification.
Biti said the countryâ€™s revenue collections had been steadily rising from January with revenue of US$4,7 million and US$28,7 in February. In March revenue rose to US$41,7 million, US$51,6 in April and US$66,8 million on May.
BY PAUL NYAKAZEYA