ZIMBABWEANS are now paying for the government’s failure to service international debt, with the country set to spend.
ZW$1 176 218 000 000 (US$203 146 459) on debt servicing, more than funds allocated to some key government ministries.
Zimbabwe is now spending more on debt servicing compared to housing and energy put together.
The country’s debt overhang is weighing heavily on the economy, as the government cannot borrow from multilateral institutions because of past failure to honour obligations.
The country’s total debt soared to US$18.03 billion as of December 2022 from US$17.2 billion, with external debt constituting 70.9% (US$12.8 billion or ZW$8.78 trillion) while domestic debt constitutes 28.7% (US$5.2 billion or ZW$3.56 trillion).
With no budgetary support from traditional lenders such as international financial institutions due to non-payment of arrears, Zimbabwe has been mainly relying on grants, bilateral loans and domestic resources to finance its key capital projects.
After allocating ZW$1.2 trillion to servicing debt, the government has allocated a paltry ZW$90bn towards the ministry of Energy and Power Development, ZW$353bn to National Housing and Social Amenities and ZW$131bn to Industry and Commerce.
The Zimbabwe Coalition on Debt and Development (Zimcodd), a social justice watchdog, says there is a need for the government to continue dialoguing with creditors, while swiftly implementing economic, governance, and land tenure systems to receive debt relief.
“The 2024 proposed budget has laid bare the negative impacts of high indebtedness as the country now spends more resources on debt servicing than on social protection. In 2023, the Treasury paid US$55.6 million and US$10.7 million on external debt servicing and token payments respectively,” said Zimcodd in its analysis.
“In 2024, the budget resources totalling ZW$948.3 billion are earmarked for interest payments, an amount far exceeding the resources earmarked for some key ministries such as housing (ZW$353 billion), energy (ZW$90 billion), youths (ZW$210.2 billion), and women (ZW$188.1 billion).
“As such, there is a need to continue dialoguing with creditors and swiftly implement identified reform matrices (economic, governance, and land tenure systems) to receive debt relief. In addition, debt transparency must be increased and mortgaging of natural resources for more debt be discontinued.”
The paltry allocations to other key ministries, for instance Energy and Housing, are ironic, considering the Zimbabwean government has missed its target to provide cheap and affordable housing over the past years.
In 2018, the government promised to deliver 300 000 houses per year, but in 2020 it lowered the bar to between 20 000 and 30 000 units per year, targets it has been struggling to meet.
Rolling power cuts have also been taking a toll on residential areas, with some areas going for over 15 hours without electricity.
Zimbabwe’s industrial areas, particularly in Bulawayo and Harare, have transformed into relics of what they used to be, with several companies closing over the past decade.
The country is struggling to service its debt, despite latest statistics showing a decrease in domestic creditors over the past year.
“The proposed 2024 budget has shown that as of September 2023, Zimbabwe has domestic creditors of US$5 billion, down from US$5.2 billion in December 2022 and external creditors of US$12.7 billion, declining from US$12.8 billion as of December 2022,” Zimcodd said.
“The retrenchment of debt is largely attributable to a decrease in liabilities on the RBZ balance sheet by US$684.8 million. However, the nation remains trapped in debt distress, that is, struggling to honour financial obligations to its creditors, and debt restructuring is required.
“This is shown by ballooning arrears and penalties; of the US$9.1 billion bilateral and multilateral debt, 76% (US$7 billion) are principal arrears, interest arrears, and penalties.”
Ncube’s 2024 budget proposal has raised a public outcry, with numerous tax hikes to be effected by January 2024.
According to the new budget, toll fees have been hiked on premium roads like the Harare-Beitbridge and Plumtree-Mutare highways as well as on other roads by between 250% and 300%, sparking an outrage.
Passport fees have also been hiked, with an ordinary passport now costing US$200, up from US$120, while an emergency passport now costs US$300, up from US$220.
Economist Professor Gift Mugano said Parliament should reject the new budget, as it is anti-people, with the proposed tax hikes projected to bring more pain to already impoverished citizens, hence deepening the socio-economic crisis.-STAFF WRITER
