GOVERNMENT says it is working on debt assumption procedures for the resolution of blocked funds and foreign exchange legacy debts, two years after committing to assume the debts through the central bank.
RONALD MUCHENJE
In a ministry of Finance annual public debt bulletin for the 2020 financial year released last week, Treasury said the procedure will be guided by provisions of the Public Debt Management Act (Chapter 22:21).
The central bank has since 2019 accrued legacy debts during the US dollar-Zimdollar exchange rate parity era, estimated at US$2.9 billion, having closed applications for qualification under the Legacy Debts Framework in August 2020.
“These are pending validation and reconciliation by the ZPDMO (Zimbabwe Public Debt Management Office). Following the policy announcement in the 2021 Monetary Policy Statement on the resolution of blocked funds and foreign exchange legacy debts, Treasury is working on the debt assumption procedures guided by the provisions of the Public Debt Management Act (Chapter 22:21).
“The procedures include validation and reconciliation process, Cabinet and Parliament approval for the Debt Assumption Bill,” read the document.
While there have been fears that a resolution of this debt would cause a crisis in the economy, the document further states that the legacy debts resolution framework will be designed to ensure that it is not inflationary and the settlement plan will use long-term instruments, taking into account fiscal capacity and debt sustainability.
Meanwhile, RBZ external debt stood at US$2.9 billion as at the end of December 2020 mainly consisting of guaranteed facilities for the importation of strategic commodities and raw materials which were done on behalf of the government.
The bulletin noted that this external debt stock excludes non-guaranteed facilities and blocked funds.
“Government is closely monitoring RBZ debt to ascertain the fiscal risks emanating from contingent liabilities in the form of called-up guarantees,” read the document.
Zimbabwe is in debt distress, having closed the year 2020 with external public and publicly guaranteed debts totalling US$10.523 billion
