Staff Reporter
ZIMBABWE’S external debts are growing faster than the economy with the total debt stock rising 21 percent to US$5,7 billion over the last 12 months and 62,9 percent from US$3,5 billion since 2000, as arrears and interest costs mount.
Gross domestic product (GDP), which is a measure of economic growth, is estimated to have grown 4,7 percent to about US$4,5 billion last year, a level about US$1,2 billion smaller than the size of the country’s total obligations to external creditors.
“The growth in public debt is a reflection of penalty charges on external payment arrears as well as short-term loans contracted by the Reserve Bank of Zimbabwe (RBZ) on behalf of the government, in the absence of official development assistance,” RBZ governor, Gideon Gono, has observed.
Excluding arrears, Zimbabwe’s total debt stock amounted to US$1,427 billion by the end of the 2009 fiscal year.
However, an interest bill of US$4,244 billion on outstanding payments drove total obligations to US$5,670 billion, creating a crippling debt overhang.
Borrowings by the government and state owned enterprises constituted 99 percent of the country’s total foreign debt with the private sector accounting for only 0,1 percent, mostly short-term loans.
The bulk of state debts are owed to multilateral lenders, particularly the World Bank, which on its own accounts for 54,3 percent of debt to multi-country creditors, followed by the Paris Club lenders led by Germany and France.
The country’s economic planners have not made any provision for debt servicing in the Medium Term Plan (MTP), a five-year economic blueprint covering the fiscal period January 2010 to December 2015, in an attempt to push the case for debt cancellation but risking an unsustainable debt overhang.
“Any significant servicing of this debt will have an impact on achieving the desired projected growth rate and, therefore, no provision has been made to service the debt in the Plan period,” reads part of the MTP draft.
The absence of a national debt policy and strategy has made it difficult for the country to take advantage of the low debt servicing costs arising from record low interest rates in global capital markets as a result of the global financial crisis to achieve a sustainable debt rollover.
Instead, arrears have ballooned, driving foreign debts above the level of GDP, that way mortgaging the future growth of the country to external creditors.
Assuming global interest rates don’t make a meteoric rise in the near term, the only debt management option available to the country is strictly to deliver robust growth and hope it maintains its momentum.
Show/Hide commentswritten by Maone Simbarashe\Hre, April 26, 2010
-
- +0
-
-
Show/Hide comment form