LAST week, Zimbabwe continued with its structured debt clearance dialogues with foreign creditors owed over US$14 billion, as the country makes important steps to weave its way out of the debt hole.
Stakeholders to the crucial dialogues are determined to thrash out a viable plan to the clearance of principal debt and arrears, which have been accumulating since Zimbabwe defaulted from 1999.
The country’s total consolidated debt stands at US$17,5 billion, according to official reports, which is just over half of the country’s US$30 billion gross domestic product.
Domestic debt was estimated at US$3,4 billion before last week’s meetings took place, with debts owed to bilateral creditors at US$5,75 billion.
About US$2,5 billion is owed to multilateral creditors.
To help the country tackle the crisis, government last year appointed two eminent African leaders - African Development Bank president Akinwumi Adesina and Joachim Chissano, the former Mozambican head of state, as high-level facilitators.
It is the first real attempt by Harare in six years to address the debt crisis.
The late former president Robert Mugabe’s plan, discussed during the World Bank and International Monetary Fund Spring meeting in Lima, Peru in 2015, collapsed due to lack of political will.
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But the levers of power have shifted.
President Emmerson Mnangagwa, who assumed power in 2017, appears determined to address the debt crisis.
But he faces so many hurdles.
He has to agree to several demands attached to the debt clearance plan, some of which led to the flop of the Lima plan.
In Harare, some analysts say agreeing to the conditions would be crucial for Harare. But some of them are reminiscent of those set out in the Zimbabwe Democracy and Economic Recovery Act (Zidera), an American law.
These include holding credible, free and fair elections during landmark polls expected in August and addressing human rights concerns.
Stakeholders have also emphasised that Zimbabwe must carry out political and electoral reforms, as part of efforts to give the international community assurances that the country is ready to address its problems.
Two weeks ago, Finance and Economic Development minister Mthuli Ncube announced several new measures to stabilise the economy, including reviewing the way the Reserve Bank’s foreign currency auction system works.
Facilitators to the dialogue viewed them as an important step towards reforms.
Economist Chenaiyimoyo Mutambasere said there was so much groundwork required to address Zimbabwe’s debt.
She pointed to several grey areas that have to be explained.
“The genesis of our debt crisis is structural – financing of underperforming state-owned enterprises, overpriced government contracts that under deliver and are not tied to a payback period,” Mutambasere told the Zimbabwe Independent.
“These include the Deka project, which was funded by India Exim Bank in 2014, but work only started in 2019/2020 with the quotation now costing nearly three times.
“The loan was also diverted to pay off the Chinese for the Hwange Power Station Unit 7 and 8 loan, which is resource backed. This reflects the complex structural issues associated with the Zimbabwean debt.
“We need a public debt audit. We still lack clarity on debt commitments outside of the Paris Club. A debt audit is the first step if the government is being transparent about upholding the notion of governance reform. You cannot ask for debt forgiveness if there are no signs of repentance,” Mutambasere added.
She noted that holding ‘credible and fair elections’ remained a major issue in Zimbabwe.
Mutambasere said while there had been talk over reforms, this had not translated into practical action.
“The elephant in the room is credible and fair elections.
Mnangagwa's sentiments are empty words as they do not reflect what is happening on the ground. The electoral process continues to be sabotaged by acts like the imprisonment of opposition figures,” she said.
Stephen Chan, a world politics professor at the University of London, said it was important to note that Chissano made it clear that tackling Zimbabwe's debt hinged on external confidence in Zimbabwean political processes.
“The government has a poor economic track record on which to contest the elections,” Chan noted.
“The flurry of recent financial reforms may benefit some of the rich, but not the majority of people struggling with the cost of living. These are the bulk of the electorate. In a fully open and fair election, government might struggle to get the votes it needs.
“In that case, it might have to choose between continued power and external help in restoring the economy. The track record of (the ruling) Zanu PF is a quest to stay in power,” Chan said in an interview.
Mnangagwa acknowledges that the plan must be implemented for Zimbabwe to unlock new external financing.
But his government has always been found wanting.
Gift Mugano, executive director at Africa Economic Development Strategies, said there were high chances the dialogue could fail.
“When I look at the conditions being set, I see the reminiscence of Zidera because these are the very same things that are inside the Act, leading to the imposition of sanctions against Zimbabwe,” he said.