By Kudzai Kuwaza
GOVERNMENT should employ a hybrid method of clearing debt arrears and canvas the support of the international community to have its debt cancelled, a Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) report says.
Speaking at a Zeparu validation workshop focusing on the assessment of arrears clearance strategies and sustainable debt policies for Zimbabwe, Zeparu researcher Erina Chipumho said there are a number of options for debt relief.
These, she said, include the Highly Indebted Poor Country (HIPC) programme, debt restructuring, debt swap, borrowing against the country’s assets and debt refinancing.
However, she said the country does not qualify for the HIPC programme as it does not meet the requirements to be assisted under this option. Chipumho said debt restructuring would only defer payment obligations without permanently resolving the country’s debt problem. She said the country did not have a local currency needed for a debt swap while warning that borrowing against the country’s assets could result in the country being mortgaged.
She said the research by the unit shows that there is need for a hybrid approach which includes components of HIPC elements, adding that restructuring all the country’s outstanding arrears would need US$1 billion annually.
Chipumho pointed out that although repaying the debt would have a huge strain on social services such as health and sanitation in the short-term, it would be beneficial to the economy in the long run.
Participants at the meeting, however, felt that the study should have been done using the current debt levels and not the debt levels of 2017 on which the study was premised. Other participants felt that there was not enough emphasis on the domestic debt, which has increased by more than 34 times from US$275,8 million in 2012 to the current level of US$9,5 billion.
Other concerns about the report was that it did not factor the impact of fiscal indiscipline on the country’s astronomical debt levels while some felt that the report did not clearly spell out what was meant by taking a hybrid approach to clearing debt.
Zeparu also presented an assessment of the Macro-economic policy formulation and implementation processes in Zimbabwe which establishes that the implementation stage is “the graveyard” of most national policies
The report found that the structure of budgetary spending in the country has been a major source of macroeconomic balance. It also noted that inadequate data, non- compliance in the payment of taxes and the lack of diagnostic studies to inform policy formulation are among the reasons why policy implementation of national policies are weak.