GOVERNMENT was this week caught in the eye of a storm after the Reserve Bank of Zimbabwe (RBZ) said it had accumulated US$2,23 billion in fresh debt between July 2019 and July 2020.
Authorities had said they were making frantic efforts to control public expenditure but the central bank’s July economic review showed that net foreign liabilities had shot to ZW$366,35 billion in July this year, from ZW$23,28 billion in July 2019.
Based on the official exchange rates of US$1:ZW$9,18 at the end of July 2019 and US$1:ZW$76,76 at the end of July this year, the net liability translates to US$2 536 716 396 and US$4 772 767 727.
The astronomical rise courted the ire of former finance minister, Tendai Biti, who slammed the RBZ for taking up fresh debt without seeking parliament’s approval.
“Parliament has made it clear that the law must be followed,” Biti said.
Biti also serves as parliament’s Public Accounts Committee chairperson.
“Section 327 of the constitution requires (the) prior approval of parliament. The RBZ quasi fiscal activities centred around illicit dealings in foreign currency, fuel, debt, Command Agriculture, Treasury Bills, fuel and energy subsidies …” Biti claimed.
RBZ governor John Mangudya was not available when reached by the Zimbabwe Independent this week.
However, a senior central bank official who declined identification said figures announced this week contained several facets of the national debt, including that incurred by the private sector.
“If you look at the International Air Transport Association debt, for example, that is part of the debt,” the official said.
“It is not all government debt. If the RBZ did not do that, companies would collapse.
“About 80% of the US$2,23 billion represents blocked funds, 10% is debt for services rendered to government during the period and the remaining 10% represents interest on existing debt owed to international financial institutions (IFIs),” the official told this newspaper.
“The government had to pay as there was no foreign currency for companies to pay that legacy debt. Yes, there was an amount borrowed by the government, but it will be very low as these were borrowings rendered to Zimbabwe that has not been paid for, which includes electricity from
Mozambique and South Africa and different financial facilities received during the one-year period,” he noted.
After the introduction of the domestic currency in June last year, the RBZ announced that it would assume legacy foreign debts of some corporates to help them ride out a blistering foreign currency crisis.
The funds which the RBZ assumed were blocked funds related to external obligations that could not be remitted between January 2016 and February 2019.
The industrial crisis itself had been triggered by a contentious foreign currency retention policy that the RBZ pursued, which compels exporters to access some of their export earning in Zimbabwe dollars.
“You must remember that the country received no debt cancellation from IFI’s so there is interest that has to be paid on these loans. So, you will find that interest alone to IFIs rose by US$250 million during July 2019 and July 2020.”
This week Biti told The Zimbabwe Independent that all liabilities were claims that had to be paid.
“All liabilities are debts that someone has to pay, it’s just a question of time,” he said.
Finance minister, Mthuli Ncube told reporters this week that some of the debts were covered by commodities.
“Some of this debt is actually, in a sense, commodity covered because we are using commodities gold, platinum and so forth to support the repayments of this debt so it’s technically off-balance sheet you can think of it like that. It’s not a big issue at all,” he said.