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‘Debt can be a resource if used properly’

LAST week, Bulawayo hosted a major conference on debt, where stakeholders explored ways of addressing the challenges that confront Zimbabwe as it grapples with creditors. The country is trapped in a vicious debt cycle. It has to decide whether to service debts and leave the government with little funding for key social interventions, or to feed its citizens while the debt spirals out of control. But as African Forum and Network on Debt and Development (Afrodad) senior analyst Tirivangani Mutazu (TM, pictured) tells our reporter Melody Chikono in the discussion below, a key factor in resolving the debt crisis is re-engaging creditors to cool off tempers. Here is how their discussion went:

MC: Can you take us through the journey you have travelled in your quest for debt development and related issues?

TM: We started a long time ago. Afrodad started in 1996 when countries were campaigning for debt cancellation. Over the years we managed to build a better understanding of the debt context in African countries.

We have managed to understand the causes and the drivers. We have realised that debt is a resource when used properly. If the government borrows and invests the money for resources in productive sectors, that is great. It only becomes a problem when debt is not invested in productive sectors. It becomes unsustainable. Once it becomes unsustainable it affects citizens, not only in Zimbabwe but across the sub-Saharan Africa region.

There are economic impacts, human rights violations, denial of certain rights because the country starts channelling money to servicing debt. We have been pushing for better debts resolution mechanisms, especially with regards to multilateral, bilateral and commercial debts. We have seen that around 1996, the World Bank and the IMF came up with the Heavily Indebted Poor Countries (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI) in 2005.

That really helped in terms of reducing debt levels for most African countries. Equally, the Paris Club also cancelled debt for many countries. But we have seen African countries going on the international capital markets to borrow funds and this is a risky source.

MC: Tell us about Zimbabwe in all this
TM: Zimbabwe unfortunately cannot borrow as of now because of arrears. But the appetite to borrow is there. For instance, we hear that the government will go on the international capital markets and borrow to fund the farmer compensation programme. It’s very risky, if the debt is not managed, it becomes unsustainable. Government officials should follow national laws and regulations when borrowing. Parliament approvals are key. You cannot borrow without parliamentary approval.

MC: Do we have strong institutions to manage debts?

TM: I am happy that at least there is some movement in terms of the Debt Management Office, the Ministry of Finance and the Reserve Bank of Zimbabwe. But we need coordination among these institutions so that their expertise is respected by politicians. They need to play their role very well; they must not be compromised. We have seen governments collateralise their natural resources. That is mortgaging the country.

We would not want our government to go through that route. For bringing stakeholders together is important because we share knowledge and information. We sometimes share strategies on how best we can push forward debt issues and make recommendations to governments. If they take them up, it will be good for nations. If they don’t we continue to advocate and knock sense into governments to manage debts properly.

MC: How does Zimbabwe’s debt situation differ from other African countries?

TM: For Zimbabwe the challenge has to do with arrears. We owe the World Bank and African Development Bank who are considered preferred creditors. Before you deal with commercial debt problems, you have to deal with multilateral debts. So that is the challenge.

Once Zimbabwe clears these debts, it will have a chance to restructure its debts. Zimbabwe has been largely on its own politically. The reengagements efforts that are underway are very important so that debts can be managed easily.

MC: Let’s talk about the relationship between corruption and debt.

TM: Corruption and debt are very much linked because we see a lot of corruption in projects that are financed through debt. However, we have seen efforts by the government through the Zimbabwe Anti-Corruption Commission (Zacc) to fight corruption.

We hear Zacc is making progress but citizens expect arrests. Corruption is there and debt is there. What is important is how we deal with the issues.

MC: What’s your comment on collateralisation of assets by governments?

TM: We have seen it in other countries who borrow and collateralise their diamond reserves or gold claims. This is not the best route we want to see our governments take because you don’t know the value of the minerals underground. You end up disadvantaging the future generation. It’s a very complex strategy that negatively affects countries.

MC: Tell us about your efforts to curb debt distress in Zimbabwe?

TM: Afrodad is only based in Zimbabwe in terms of its secretariat. But it’s a regional organisation that works in quite a number of countries. We have done a lot of work in Zimbabwe not only on debt but also on illicit financial flows and other issues.

When the former Minister of Finance Tendai Biti was in office, we were part of the CSOs that worked on the arrears clearance strategy. This was one of the ways in which we contributed.

On different platforms that we engage the IMF, World Bank and AfDB we raise the Zimbabwe debt issue. We tell these institutions to help Zimbabwe resolve the debt issue or cancel the debts. We also involve parliamentarians to make sure they play their oversight role.

MC: What is your comment on the RBZ? We hear that it has contracted a US$2,23 billion debt without going through the right channels?

TM: Such deals should be condemned. It’s not only in Zimbabwe. The same happened in Mozambique when government executives went to borrow without the knowledge of parliament.

Projects that were supposed to be financed through those resources never materialised. There should be transparency because at the end of the day citizens suffer when it comes to repayments. Without transparency it becomes a big issue. As civil society and Zacc, these are the issues we should pick. If there are any transgressions in terms of national laws and regulations, there should be consequences and penalties.

MC: What challenges have you faced in trying to implement important strategies in Zimbabwe?

TM: The Zimbabwean context presents a lot of challenges. The first is the macroeconomic environment. The second is the political relations, especially with international financial institutions. There have been issues raised around human rights, transparency and accountability.

I think these challenges make it very difficult for CSO’s to run with the Zimbabwe issue. Where we would want to campaign for Zimbabwe’s debt cancellation, these issues have been raised. Reforms are needed, especially in government. These can be governance or political reforms. The reengagements programme should focus on this so that our work as civil society becomes easy.

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