FINANCE minister Mthuli Ncube has said he does not expect any change to the United States policy on Zimbabwe despite the change of administration in that country when President-elect Joe Biden is inaugurated in less than two weeks’ time, but has pledged to continue the re-engagement process.
The then US senator and now President-elect Biden, together with Republican Senator Jesse Helms of North Carolina and Democrat Senator Hillary Clinton of New York, sponsored the Zimbabwe Democracy and Economic Recovery Act (Zidera) of 2001.
Zidera is an act passed by the United States Congress which imposed economic sanctions on Zimbabwe, allegedly to provide for a transition to democracy and to promote economic recovery.
Biden will be sworn in as the 46th president of the US on January 20.
President Emmerson Mnangagwa’s government has said Zidera is the reason why the country’s economy has imploded over the past two decades and has been pushing for the removal of the sanctions.
But the US says the country’s ailing economy is a result of mismanagement and corruption. The US has said the sanctions would remain in place until the government of Zimbabwe implemented tangible political and economic reforms.
“I think you will agree with me that countries such as the US and many other developed countries really work on the basis of their state institutions and that state institutions will not change much,” Ncube said in an interview with businessdigest recently.
“They will still have the same policies and our strategy for engagement therefore will remain focused on working with those state institutions,” Ncube said.
“Even if you may hear different words being used, the state institutions remain focused on whatever they desire to achieve or whatever message they want to send across, so we are not worried that suddenly, perhaps, we will be unable to engage.
“Certainly, we will be able to engage; we will continue to engage; we will continue to deepen that engagement to make sure that both countries, Zimbabwe and the United States, can move forward together, and achieve more together rather than try to achieve things apart. So our strategy on engagement will not change.”
Ncube said the country’ s debt was manageable with the major challenge being the servicing of that debt.
“We must always watch out for debt distress as a country. Our debt levels are about 78% of GDP and, by the way, that’s not very high by international standards, actually. Most countries now because of Covid-19 and the global financial crisis of 2008 are well over 100% (of their GDP in debt) so at 78% we know it’s high but is manageable. Our issue in Zimbabwe has been the capacity to service the debt rather than the level of debt,” Ncube said.
“We can grow our exports and earn enough revenues and foreign currency to service that debt. But look, with a target growth rate of 5% we will be able to service that debt if we overlay our debt restructuring plans. Really, our debt if you look at it, has mainly been around foreign currency debt as opposed to domestic debt.”
He said domestic debt was well managed and it was really foreign currency debt which has been of major concern which is why the government was focusing on growth, enhancing exports and restructuring the debt.
“In terms of arrears clearance, certainly we will make a lot of progress. What really slowed us down is Covid-19. It became the new issue to deal with,” Ncube said. “We had to worry as a government about feeding people, about keeping safe, about keeping people healthy, and less about settling our debts. But now that we are almost learning to live with Covid-19, we are hopeful about a vaccine soon and then our attention will shift more to arrears clearance.”
Ncube said the core of the financing strategy was through domestic resources and continuing to engage international financial institutions for external relief.
As a result of Zimbabwe not accessing fresh capital, the government has been unable to support its excessive expenditure resulting in increased debt for the country.
The excessive expenditure has been driven by mostly quasi-fiscal activities such as the Command Agriculture programme, policy inconsistencies and the wage bill.
By the end of 2018, the Parliament Public Budget Office estimated the public debt to have ballooned to US$20 billion before the government re-introduced the Zimbabwe dollar in 2019, wiping off over US$7 billion in domestic debt.
However, due to the central bank assuming the debt of local businesses who failed to pay their foreign suppliers owing to the Reserve Bank of Zimbabwe’s (RBZ) retention thresholds of export proceeds in 2019, the country’s external debt has significantly risen again.
According to the latest central bank statistics, between September 2019 and September 2020 foreign debt grew by US$1,65 billion.Officially Zimbabwe’s debt is US$7 billion, or over 200% of the country’s GDP.