HomeOpinionMammoth govt debt cripples Zimbabwe

Mammoth govt debt cripples Zimbabwe

Since Zimbabwe gained Independence 34 years ago government has endlessly resorted to borrowing money.

Eric Bloch

In the main, the lenders were international including major entities such as the International Monetary Fund (IMF), the World Bank, the African Development Bank, the Chinese government and banks, and many others.

So great has been the borrowings that government has accumulated loan debt of US$9, 9 billion, and domestic loan debt of US$99,1 million.

The total loan indebtedness of the Zimbabwean government is US$9,9 billion (and that does not include considerable amounts owing to civil servants for arrear salaries, and to suppliers for goods and services rendered).

Moreover, in addition to the government debt, the Reserve Bank of Zimbabwe (RBZ) has accumulated international and domestic debt of US$1,35 billion, of which the domestic debt amounts to US$754 million, and the international debt is US$596 million. Government has committed itself to assuming the RBZ debts, the consequences of such assumption of debt being that government’s present total indebtedness will increase to US$11,25 billion.

Initially the recourse to borrowings was necessary for, despite the impressive amount of international aid that was forthcoming upon the end of the 15-year period of the Unilateral Declaration of Independence (UDI) in 1979, and hence the end of a Rhodesian Front government of the country, much money was needed for the resettlement of thousands who had been out of the country during UDI to effect infrastructural repairs, restoration, or replacement of essential infrastructures that had been damaged or destroyed during the liberation war.

In addition, there were many other very essential expenditures which necessarily had to be incurred. With such great expenditures, the generous financial aid given by diverse countries, and the relatively limited tax and allied revenues flowing to the fiscus from a small, fairly debilitated economy, did not suffice and necessitated recourse to borrowings.

The Minister of Finance Patrick Chinamasa has announced government’s intention to establish an entity to be known as Zimbabwe Debt Management Office (ZMDO) to manage Zimbabwe’s’ national debt, and to procure the progressive reduction of that indebtedness, albeit that for the foreseeable future Zimbabwe will have to seek new international and domestic loans, concurrently with effecting payments. This is especially so as a major priority of ZMDO will be to ensure repayments of those international loans which are long overdue for settlement.

(This includes monies which were due for repayment to the IMF much more than a decade ago).

Such massive payment defaults preclude IMF, in terms of its constitution, from making further loan funds available, and severely impairs the assessment, by many other potential lenders, of Zimbabwe’s creditworthiness.

In reality, ZMDO will be naught but a division of the Ministry of Finance, for any and all decisions made by ZMDO will undoubtedly require the concurrence of the Minister of Finance, save and except for certain proposals or decisions requiring the approval of cabinet.

Nevertheless, it is pleasing that government has recognised the need for positive policies and action to achieve progressive reduction of debt, and to establish an international perception of Zimbabwe being a credit-worthy State.

What must ZMDO do to achieve those objectives? The answer is manifold, including (in addition to other actions):

A massive constraint in the immense expenditures of government, and of most of its underlying entities, the constraint being sufficiently great as to at the very least achieve expenditures equal to revenues ie a balanced budget, with hopefully the expenditures incurred being progressive repayment of Zimbabwe’s debts.

The state needs much funds, including for national health care (available to all in need), education, administration of government, essential infrastructural maintenance, and the like. But it is incomprehensible that Zimbabwe have over 232 000 state employees (to service a resident population of less than 12 million).

To some extent the over-employment is due to the existence of fraudulent “ghost-workers”.

An independent, professional audit three years ago identified government had in excess of 40 000 ghost workers, which was clear evidence that some in high authority in various ministries were defrauding the state, claiming the wages of the alleged employees.

It is incomprehensible that three years later such frauds have only been eliminated in respect of about 20% of the identified ghost workers.

Even more incomprehensible is the magnitude of the Zimbabwean cabinet, and its underlying deputy ministers.

Zimbabwe manages to have ministers and deputy ministers equal to three times the number in the State of New York, which has a population five times that of Zimbabwe. Similarly, Australia and its retrospective states only have approximately one-third of the number that governs Zimbabwe.

Obviously, the applied criteria in Zimbabwean determination of the creation of ministries, and the consequential appointment of deputy ministers, is driven solely by the concept of “jobs for the boys” in order to maximise political party unity, and unequivocal support for the president and presidential hierarchy.

But the costs are prohibitive. Every minister, and many deputy ministers, are provided with housing, all are provided with motor vehicles and chauffeurs, and each ministry has extensive personnel loans overseen by a senior official, being the ministry’s permanent secretary.

In addition, each of the ministries has diverse operational costs ranging from rentals, stationery, telephones, refreshments and cleaning of premises, among many others.

Much of such expenditures could be substantially minimised if some of the ministries combined and consolidated, but the presidency undoubtedly fears very negative in-party political upheaval and divisions.

It is indisputably necessary that Zimbabwe should participate in meetings of the United Nations, the African Union, Sadc and other international and regional bodies.

But is it necessary that the president, or certain ministers, are accompanied by any number between 40 and 80 colleagues, subordinates, and spouses?

The air travel costs, total accommodation charges, travel allowances and other expenditures are far beyond Zimbabwe’s needs and means, and contribute to the recurrent budget deficits.

Probably the greatest contributer to the Zimbabwean government’s insolvent state is corruption. It is incontrovertible that both the public and the private sectors of are engaged in corrupt practices. Some do so out of desperate financial stress, being unable to meet the bare essentials of survival for themselves, their families and other dependants.

Recent Posts

Stories you will enjoy

Recommended reading