Debt Trap Proposal Divides Govt

GOVERNMENT is divided over Finance minister Tendai Biti’s proposal to put Zimbabwe in the realm of the Highly Indebted Poor Countries (HIPC), as Zimbabwe battles to extricate itself from a huge debt trap.

The new war of attrition is the latest round pitting Reserve Bank governor Gideon Gono who is opposing the debt relief plan and the Finance chief whose proposal is under consideration by the unity government.

Zimbabwe has a US$5,7 billion external debt

 

 

 

Addressing delegates at a Debt Repayment Workshop yesterday in the capital, Biti maintained that HIPC was the best option for government because the other options did not offer Zimbabwe a “holistic and viable approach to its debt and arrears problem”.

Biti produced a comprehensive document on debt and arrears clearance which is under government discussion.

In his document, the treasury proposed four debt and arrears clearance options which include mortgaging mineral resources to clear the growing debt; servicing through internal revenue inflows; Paris Club debt-rescheduling; and the HIPC option for consideration by cabinet.

Biti has proposed that Zimbabwe should adopt HIPC status because it has some advantages which could reduce the country’s debt burden by 90% after full delivery of debt relief.

The Finance minister argued that the debt relief programme was based on the experiences of 35 countries for which packages have already been approved leading to debt servicing declining by 2,5% of GDP between 1999 and 2007.

Informed sources told the Zimbabwe Independent that Zanu PF ministers were opposing the plan because it would turn Zimbabwe into “a desperate basket case”. They said HIPC would worsen the current situation in the long term and should be blocked in cabinet.

Woman’s Affairs, Gender and Community Development minister, Olivia Muchena who made a presentation at the same conference differed with Biti saying HIPC would not yield much in Zimbabwe due to economic sanctions imposed on the country. The United States introduced the Zimbabwe Democracy and Economic Recovery Act in 2001 which Zanu PF spokesmen blame for the ballooning debt.

“Fundamentally we cannot ignore the existence of sanctions that are prohibiting us (Zimbabweans) from doing business. Against such a background, what is required (to be considered for (HIPC) will not work,” Muchena said.

Zimbabwe’s  former ambassador to China and Zanu PF strategist, Christopher Mutsvangwa, said government should implement “home-grown instances of resources for dollars” in its bid to clear the debt.
He suggested that Zimbabwe could mortgage its relatively vast mineral resources. The country has the world’s third largest platinum reserves after South Africa and Russia.

Said Mutsvangwa: “The country suffers from no inherent incapacity that would require outside management of its resources for it to get out of the debt trap which was exogenously induced.”

In a clear attack on Biti he said: “With these endowments and capacity, I am at a loss as to how any self-respecting Zimbabwean could ever think of surrendering the salvation of his country to any foreigner, no matter his professed intentions to assist.”

Adopting HIPC Mutsvangwa said could result in the “disastrous  consequences” that followed the IMF-prescribed economic structural adjustment programme of the 1990s.

Zimbabwe currently needs up to US$10 billion for economic recovery.

It is officially estimated the country needs US$45 billion over the next 10 years to recover to 1997 gross domestic product levels.

Despite the simmering tension between the two political parties over the issue, the Confederation of Zimbabwe Industries president Kumbirai Katsande and Economic and Planning minister Elton Mangoma contended that HIPC was the best option for the debt-ridden government.

 

Paul Nyakazeya/ Bernard Mpofu

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