Zimbabwe News and Internet Radio

Huge government debt alarms economists

By Pauline Hurungudo

Government’s insatiable appetite for borrowing has alarmed economists who warned that it amounts to mortgaging future generations.

Zimbabwean Finance Minister Mthuli Ncube (File: AFP)
Zimbabwean Finance Minister Mthuli Ncube (File: AFP)

The country’s total debt stock is almost reaching $20 billion, excluding government’s indebtedness to former white commercial farmers whom it owes substantial amounts of money for land developments on seized farms.

While the foreign debt stock stood at $7,5 billion in December 2017, it has since ballooned to $11,5 billion.

In recent weeks, government has been stitching more deals to improve the country’s liquidity situation.

For instance, Treasury and the central bank are currently in the cusp of securing a $500 million line of credit facility from the Cairo-based Africa Export Import Bank and another $333 million facility from India.

While acknowledging government’s efforts in trying to stabilise the economy, economists fear that the accumulation of debt has the effect of imprisoning future generations.

Economist Carren Pindiriri told the Daily News that government needs to look for alternative sources of funding than borrowing given Zimbabwe’s unsustainable debt situation.

“Government should not borrow because we already have an unsustainable debt so what is required is currency stability, without currency stability it will be a difficult road,” said Pindiriri.

“We need to stop borrowing and survive on what we have; government also needs to build confidence by combating corruption and making policies that attract investors.

“After currency stability and proper taxing policies then we can attract more investors”.

United States economist Steve Hanke said the Harare administration should pluck a leaf from Singapore, through what he referred to as the “Singapore strategy”.

In 1965, Singapore was literally suffering the worst nightmare a country could ever face ?—? the underdeveloped, space-constrained state was expelled from Malaysia and had to stand on its own competing with all other global giants.

But within decades, it has spectacularly transformed itself from a society destined to fail to a regional superpower, proudly witnessing its Gross Domestic Product per capita soaring from $500 in 1965 to $50 000 today.

“What a joke. Foreign aid has a perfect record of failure. Zimbabwe should follow the ‘Singapore strategy’ and increase competitiveness, where is Zimbabwe one of the world’s worst,” said Hanke.

Economist Simbarashe Gwenzi told the Daily News that there is dire need for government to borrow for production from external parties, in order to boost the economy.

“The solution is for government borrowing to be focused on seeking finance to support growth of our productive sectors in order to reduce our dependency on imports in the medium and long-term,” Gwenzi said, giving the example of the US$300 million credit line from India which is for the upgrading of the Hwange Thermal Power Station. DailyNews