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Govt burdens taxpayers with US$3 billion RBZ legacy debt

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THE government has proposed assuming the Reserve Bank of Zimbabwe’s US$3.3 billion legacy debt in outstanding foreign payments incurred during the transition from the multi-currency system to a mono-currency regime in 2019.

BERNARD MPOFU

The assumption of the debt came a few years after the murky RBZ Debt Assumption Act was signed into law with government taking liability of an estimated US$1.35 billion debt incurred by the RBZ before 31 December 2008.

A large chunk of the debt was incurred by beneficiaries of the central bank’s farm mechanisation programme who included ministers, senior Zanu PF and government officials, security service bosses and their associates.

Government refused to release a list of the beneficiaries of the programme despite it being placed on the shoulders of taxpayers.

Presenting the 2022 budget statement in Parliament yesterday, Finance minister Mthuli Ncube said: “During the transition from the multi-currency system to mono-currency in 2019, there were outstanding foreign payments estimated at US$3.3 billion as a result of shortages of foreign exchange. The outstanding payments were shelved as blocked funds/legacy debt.

“Government seeks to assume the legacy debts/blocked funds held by the Central Bank on its balance sheet in order to create a sound RBZ balance sheet. The intervention is based on the recognition of the role of the financial sector in economic development and the need to ensure fair compensation for losses that occurred during the currency reform period.

 “The proposed blocked funds assumption will be done through issuance of long-term Government securities (tax exemption, liquid asset status, prescribed asset status and tradable).”

 Former Finance minister Tendai Biti, who described the budget as irrelevant because of its “failure to address the structural issues around currency, the auction rate, deficits, corruption and debt question” slammed the assumption of the debt. The Bill for assumption of blocked funds is anticipated to go through Parliament during the first quarter of 2022.

 “The illicit takeover of RBZ legacy debts, three years after the RBZ Debt assumption Bill, is criminal. RBZ is a haven for crime and deficits,” Biti said.

Meanwhile, Zimbabwe’s external debt rose by over 20% to US$13.2 billion as of September this year compared to US$10.7 billion reported at the end of last year, official figures released by Treasury have shown.

 With no budgetary support from multilateral financial institutions, Zimbabwe has largely relied on internal resources in the form of taxes, bilateral loans, grants and financial support from regional banks such as the African Export and Import Bank to finance key capital projects such as infrastructure development.

Finance minister Mthuli Ncube on Thursday presented the 2022 National Budget, revealing that Zimbabwe had borrowed offshore to finance some of its key infrastructure.

Official reports show that Zimbabwe, which has been struggling to access long-term financing from multilateral lenders due to a huge debt overhang, requires over US$15 billion to upgrade its infrastructure in energy, road network and water and sanitation.

“Zimbabwe’s public external debt stock is estimated at US$13.2 billion as at end September 2021. Of the public external debt, US$5.45 billion is owed to bilateral creditors, US$2.67 billion to multilateral creditors, US$221 million to creditors under the 2015 RBZ Debt Assumption Act and US$4.9 billion is RBZ’s balance sheet external debt,” Ncube told lawmakers during his budget presentation.

“RBZ’s balance sheet external debt comprises of US$1.4 billion guaranteed debt, US$72 million non-guaranteed debt and US$3.3 billion of blocked funds.”

 Before the budget presentation, Zimbabwe’s total public and publicly guaranteed (PPG) debt stood at US$10.7 billion. This represented 72.6% of the country’s gross domestic product.

 PPG external debt owed to the multilateral creditors, as at the end of December 2020, amounted to US$2.68 billion, of which US$1.53 billion is owed to the World Bank Group, US$729 million to AfDB, US$356 million to the European Investment Bank and US$68 million to other multilateral creditors. During the period January to September 2021, the Finance minister said, Treasury made payments to external creditors amounting to US$44.2 million.

These payments were made to active portfolios and for token payments to international financial institutions and bilateral Paris Club creditors. Payments to active portfolios are critical in unlocking disbursements for ongoing projects.

“Total external on-lent loan disbursements for the period January to September 2021 amounted to US$3.9 million, from the India Exim Bank for the Deka Pumping Station and River Water Intake System project. The low disbursements are due to accumulation of arrears on projects such as Victoria Falls Airport (China Eximbank), Netone Network Expansion Phase III (China Eximbank) and TelOne Backbone Network and Broadband Access (China Eximbank),” Ncube said.

“Projected external loan disbursements for 2022 for projects implemented by State-Owned Enterprises are estimated at US$308.6 million. The disbursements will be towards the Hwange 7 and 8 Thermal Power Station, Deka Pumping Station, RG Mugabe International Airport, NetOne Network Expansion Phase III and the Bulawayo Thermal Power Station.”

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