HomeCommentMnangagwa must resolve debilitating debt crisis

Mnangagwa must resolve debilitating debt crisis

LAST month, Finance minister Mthuli Ncube revealed shocking levels of debt that the country had accumulated from 2019 without making full disclosures in terms of the law.

He said a whopping US$1,4 billion in fresh debt had been accumulated while violating very clearly laid out disclosure laws. It took the efforts of an alert legislator to approach the courts and force him to issue a public statement about the government’s spending patterns. The country is still in the dark on why this debt, accumulated from Africa Export Import Bank (Afreximbank), had been kept a top secret. Perhaps a full Parliamentary investigation is needed to find out why debts running into billions of dollars were accrued without parliamentary oversight.

But while the country is still coming to terms with the Afreximbank secrets, the government came up with new debt figures last week. As we report elsewhere, the government said it got exposed to a further ZW$750 million, or US$9 million, through a series of guarantees to private and State firms. This time around, the Ministry of Finance did the right thing by apprising Zimbabweans, who are the shareholders of Zimbabwe Inc, about the exposure.

The reasons for taking up the new exposures made sense — funding agricultural inputs, bankrolling public infrastructure projects and enhancing food security. Still, there is a possibility that the guaranteed firms may default and the public may be forced to assume these debts. It has happened before with State firms. It is the reason why we face a debt crisis.

The government’s propensity to borrow is astounding. Public debt has reached catastrophic levels of over US$8 billion and we are still borrowing. The country’s debt-to-GDP levels are now unsustainable but the system is still clamouring for more.

Financial institutions have discovered Zimbabwe is a bad debtor so they are demanding bigger surety — the country’s minerals, and other resources before releasing fresh debt. International lenders have given up on Zimbabwe. Even those whose debts have been paid up are saying pay up other creditors before they can unlock new lines of credit.

The risk of pumping money into Zimbabwe is now high and the world can’t just continue to pump fortunes into a bottomless pit. The problem is, it is not only the government that has been shut out of global markets. What happens at government level cascades down to our companies, where the high country risk translates into high interest rates. This is why the cost of Zimbabwean products is high.

There are hidden costs to companies emanating from the government’s mistakes. When governments are over-borrowed, they resort to punitive taxes and fees, which all end up affecting the consumer. Unfortunately, the common people have blamed these companies for profiteering.

While not ruling out profiteering, it must be acknowledged that companies have been placed in a difficult situation. They have to pay high premiums to get this economy running. But despite debts climbing up at a frightening pace while the nation is kept in the dark, the level of economic decay has been astounding.

Debt is one of the biggest problems that President Emmerson Mnangagwa’s government must immediately solve.

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