THE ZIMBABWEAN government has taken measures to manage its huge debt and bring clarity to the controversial indigenisation policy as part of broader efforts to attract foreign direct investment and breathe life into an economy suffering from tight liquidity.
After repeated calls by economists and the international community for government to show commitment towards economic revival, Finance minister Patrick Chinamasa said Zimbabwe’s current economic situation was not insurmountable, but required investor-friendly policies.
“What we need to do is to make sure that we pursue policies that attract foreign direct investment, more participation on our stock exchange through equity and that we make it conducive for support or lines of credit to our financial services sector,” Chinamasa said at a media briefing yesterday.
He said cabinet recently tasked Indigenisation minister Francis Nhema to come up with an indigenisation framework aimed at clarifying the controversial law.
Chinamasa said cabinet on June 24 approved principles to set up statutorily the Zimbabwe Debt Management Office (ZDMO) responsible for debt management operations relating to government debt, lending and guarantees, local council debt and public enterprise debt.
the ZDMO will, among other things, maintain a comprehensive and credible computerised database of public and publicly guaranteed external debt, formulate debt management policy and strategy and advise the minister on all issues relating to debt management and government borrowings, Chinamasa said.
“The debt overhang is an inhibiting factor in terms of securing and mobilising fresh capital,” he said.
“The framework will monitor how we incur debt and for what purpose and of course we are giving priority to infrastructure.”
A centralised debt system will be created and see all transactions for public and publicly guaranteed debts going through Chinamasa’s office.
Currently, Zimbabwe is engaging its creditors with a view to agreeing on a solution to clear the existing debt in order to access fresh money to build capacity to repay arrears.
“This may take two to three years,” Chinamasa said, adding the country needed to be in good standing with multilateral creditors such as the World Bank and International Monetary Fund to get soft loans at rates of below 1% interest as well as fund infrastructure projects.
As at December 2013, Chinamasa said Zimbabwe’s external and internal debt, dating back to before 1980 when the country attained independence, amounted to US$9,9 billion.
He said most of the debt relates to government guarantees on farm dam construction around the 1980s and 1990s.
The US$9,9 billion comprises US$8,9 billion external debt and US$994 000 total domestic debt. Public external debt comprised 56% of total external debt.
The Reserve Bank of Zimbabwe (RBZ) domestic debt, which will soon be assumed by government, amounts to US$754 million.
Total public and publicly guaranteed external debt stood at US$6,96 billion and was made up of US$5 billion public external debt, US$1,4 billion publicly guaranteed external debt and US$596 million RBZ external debt to bring the private sector non-guaranteed debt to US$1,96 million, US$1 billion being long to medium term and the balance short term.