The way a republic works is that we select a few people to run the country on our behalf. We give them mandates and in Zimbabwe we evaluate their performance every five years. If we are not satisfied with their performance, in theory at least, we choose other stewards.
The moment of evaluation is approaching in Zimbabwe and we will decide in whom to entrust the future of our country. So how to assess the performance of the leadership team in power since 2018?
There are many metrics we can look at to gauge exactly where the economy is. How has the inflation rate evolved, has the GDP increased, has the unemployment rate decreased, etc. There is yet another measure that we don’t usually discuss: the national debt.
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Zimbabwe’s constitution requires the finance minister to file a full statement on the country’s public debt. The last such statement was released at the end of 2021. This is where we discovered that the national debt per capita was around $1,200.
What is the national debt?
It’s as simple as it sounds. This is how much Zimbabwe owes the lenders. Zimbabwe had a debt of $17.2 billion at the end of 2021.
For some reason that doesn’t seem like a lot to me, probably because we’re the same country that may or may not have lost $15 billion US like you lose a pencil.
You could say that the government is the one in debt, but the government represents the people and it is the people who are really in debt.
If we divide the $17.2 billion among our 15 million citizens, we get $1,150. It’s your share of the national debt.
It’s not too bad all in all. Our “friends” in the South have a national debt per capita of $4,804. Americans are heavily indebted, their debt per citizen was US$91,350 in March of this year.
I wish I could say that our national debt is contained through prudence, but no, that’s not it at all. We have tried to borrow more and if the big lenders did not demand that we clear old loans first, we would have a much higher national debt.
To whom do we owe?
Bilateral creditors – US$5.4 billion
It’s a fancy way of saying it’s due to other countries. Governments lend each other and the famous Paris Club helps them meet and do it. You have no doubt heard of the Paris Club, the group of major creditor countries.
Not all bilateral creditors are members of the Paris Club, but that is the main thing. In the case of Zimbabwe, with regard to bilateral creditors, we owe $3.8 billion to the Paris Club and $1.7 billion to non-Paris Club creditors.
Multilateral creditors – $2.7 billion
This means that we owe a lot to the international financial institutions.
-1.5 billion dollars at the World Bank,
-700m$ at the African Development Bank,
-360 million dollars to the European Investment Bank and
-64 million dollars to others
We have had the above bilateral and multilateral creditors for a long time, having first defaulted in 2001 and it is forgotten what we actually used that money for. Unfortunately for us, this means we have accrued high interest on arrears.
In general, public debt is the accumulation of budget deficits. The Paris Club stepped in to help Zimbabwe with loans to help stabilize and restore its macroeconomic and financial situation. We failed to stabilize anything, but found ourselves in massive loan arrears.
Governments like to spend more than they earn and think they have to do so to stimulate economic activity. The Zim government is still undertaking many projects that cost millions or billions in some cases. For example, the lines of credit we obtained from China to expand NetOne’s network, modernize Victoria Falls airport, etc.
RBZ debt – $5 billion
The main items here are the RBZ secured loan of $1.4 billion and the blocked funds of $3.3 billion.
Secured borrowing refers to “guarantees for domestic creditors for the purpose of financing agricultural inputs, purchasing grain, importing strategic commodities and developing residential areas”.
The debt of blocked funds is insane. You see, companies operating in Zimbabwe have obligations to other parties in foreign countries. These businesses may obtain loans from external lenders to whom they may wish to make repayments. They may also have foreign shareholders to whom they wish to transfer dividends.
It was (and still is) a challenge in Zimbabwe and the RBZ failed to help 855 companies meet their obligations between January 2016 and February 2019. The companies handed over the equivalent in ZW$ to the RBZ which must now assume US dollar obligations. When we say the RBZ assumed the debt, we mean that you, the citizen, are the one who has the obligations.
Actual claims made by the companies reached $6.3 billion and the balance is still disputed. So, this RBZ debt could increase in the future.
It’s crazy that the country which is open for business did not pay the 2016 dividends due to foreign shareholders. The whole mess came from our chaotic monetary reforms when we moved from a multi-currency model to a single-currency model.
Compensation for former farm owners – US$3.5 billion
This is classified as a contingent liability, meaning it may or may not occur. Politically, no one wants to recognize this as a handicap. The truth is that many people on both political sides are against this compensation.
They feel the land was forcibly taken from black people in the first place. They ask, why then should those who took the land by force be compensated for the improvements they made on the stolen land?
That may be the case, but the reality is that the international community, especially those who control the Paris Club and institutions like the World Bank and the IMF, see it as a real handicap. So if Zimbabwe paid off all other debt except this one, the institutions we want to borrow from would still consider us to be $3.5 billion in debt.
I think that’s why the finance minister called it a contingent liability. He knows we can’t really get out of this, but he can’t recognize that it’s a responsibility we have.
In July 2020, we signed an agreement with former white farmers to pay them US$3.5 billion in compensation for improvements made to farms taken over for resettlement. So this liability really shouldn’t be classified as a contingent liability.
He calls it a contingent liability, but we are working on a number of possible financing instruments and financing options. This is not settled yet, but we are told that in the meantime, the government will continue to allocate resources in the national budget for interim relief payments to former farm owners.
The IMF warned us that our failure to compensate former white farmers would lead to an increase in our public debt. We are already up to our necks in arrears and interest and this will only sink us further.
Total national debt
When I calculated the total national debt, I included compensation for former farmers, which is why I arrived at a figure of $17.2 billion. The official figure was $13.7 billion, but that’s not accurate.
We are repaying some of our borrowings and you will have noticed that we have settled our debts with the IMF. We made our first payment to the Paris Club in 20 years last year. Token payments were also made to the World Bank, AfDB and others.
Our plans to clear these debts are based on intensifying re-engagement with all creditors. “Please be patient” should be the message. We’ll see how it all plays out, but for now, take comfort in knowing that you’re $1,200 in debt.
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