Enhancing debt management in Zimbabwe

As the final battle over Zimbabwe’s draft constitution approaches, most of the focus is on the big political issues, like presidential powers, and the scope of the bill of rights. But as clashes over these topics intensify, other critical subjects are likely to be side-lined – such as critical clauses to do with debt management.

Richard Lee's picture

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Strategic communications for WWF

October 3rd, 2012

As the final battle over Zimbabwe’s draft constitution approaches, most of the focus is on the big political issues, like presidential powers, and the scope of the bill of rights. But as clashes over these topics intensify, other critical subjects are likely to be side-lined – such as critical clauses to do with debt management.

Zimbabwe is drowning in debt. The total figure is still not publicly known but it is estimated that the country owes bilateral and multilateral creditors around US$10.7 billion – far beyond its capacity to repay. Indeed, Zimbabwe has been in default on its external obligations for the greater part of the last decade – and the bulk of the current debt is made up of interest and arrears.

And yet, the scale of the country’s reconstruction and development needs and lack of revenues mean that the government is continuing to borrow large amounts – often on non-concessional terms.

But – as Dakarayi Matanga, Senior Policy Officer at the African Forum and Network on Debt and Development (AFRODAD) argues in the latest OSISA Open Debate – the draft constitution offers a real opportunity to create a new framework for sound economic management, particularly in relation to the administration of public debt.

Prospects for improved debt management in Zimbabwe’s draft constitution (which can be downloaded below) provides a detailed look at the current clauses in relation to debt management – highlighting some important improvements in terms of enhanced accountability, transparency and inclusiveness in the loan contraction and debt management process, while also recommending ways to strengthen the draft.

“This will benefit Zimbabwean citizens, who ultimately owe the public debt and pay for it through their taxes as well as suffer the negative impacts in human development terms when it becomes unsustainable,” writes Matanga.

For example, the current COPAC draft, which will be debated at the 2nd National Stakeholders conference in the coming weeks, includes some notable advances on the existing, much-amended Lancaster House constitution, such as stressing that there must be ‘transparency and accountability in financial matters’ and that ‘the use of resources and public borrowing must be shared equitably between present and future generations’ – an essential reference to the principle of sustainable development that is glaringly absent from Zimbabwe’s Independence constitution.

In addition, the COPAC draft outlines the vital oversight role to be played by parliament and civic bodies and – critically – ensures that the government must provide the public with information about the details of all loans and periodically about the performance of the loans.

But Matanga makes it clear that the COPAC draft could – and should – be strengthened in a number of important areas by:

  • Clearly stating that parliament must approve new loans prior to the signing of contracts – rather than prior to implementation – to give it more meaningful input in the negotiation process and avoid rubber stamping;
  • Specifying the time needed for parliament to consider the terms of loans in the same way as deadlines for reporting and usage are specified;
  • Providing a clear description of the structure – a standing committee – that is necessary to guarantee a prior role for parliament in negotiating loans;
  • Including a more explicit recognition of civic groups as watchdogs, which enhance public finance ownership and accountability; and,
  • Imposing constitutionally-guaranteed limits on borrowing that are based on specific criteria.

The current Zimbabwean constitution is vague and unclear in relation to loan contraction and debt management so the COPAC draft is definitely an improvement because it deals in a more detailed way with debt management, including direct reference to the principle of generational justice of the debt, borrowing limits, gazetting of loan terms and criteria within ninety days of parliamentary approval, and systematic public statement of the levels of indebtedness.

“But there is still room for the final constitution to be even more closely aligned to the AFRODAD guidelines,” argues Matanga. “This would help to prevent Zimbabwe from facing a similar debt crisis in the future since there would be even greater clarity around the process and more transparency and accountability.”

And he concludes with a call for Zimbabweans not to ignore the importance of debt – and more general economic – management issues in the draft and to use the last stages in the process to try and ensure that the final constitution is as clear and progressive as possible.

“Zimbabweans end up paying for the national debt so they must take this opportunity to ensure that they have as much control over, and information about, future loan contractions and debt repayments as possible,” writes Matanga. “There is no better way to do that than by entrenching these principles in the new constitution, which will be the new supreme law of the land.”

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