Time to act | Business Times

 

The impact of Zimbabwe’s unsustainable debt  has been felt  as the government’s capacity to fulfil its economic obligations and deliver essential services has become increasingly   difficult , rendering  the administration  effectively incapable  of  handling major crises.

 

This is the case  because  Zimbabwe’s debt prevents international financiers, that have the financial wherewithal like the International Monetary Fund (IMF)  from  providing  financing  to the country  in a way that would  allow it to effectively respond to crises.

 

It’s imperative that the government take action now in order to obtain foreign funding from the Bretton Woods institutions and other international creditors.

The IMF had only last week referred to Zimbabwe’s growing debt as a ticking time bomb that might explode at any time.
Numerous commentators have stated that debt is a contributing element in Zimbabwe’s present financial crisis. They claim that things will most likely get worse if the government does nothing.

The head of the IMF delegation that was recently in Harare, Wojciech Maliszewski, declared that Zimbabwe’s debt load could not be sustained.

 

At the end of September 2023, Zimbabwe’s public and publicly guaranteed debt was estimated to be worth US$17.7bn, up from US$17.6bn at the same time in 2022. Zimbabwe has faced major difficulties in repaying its domestic and international debt for the last five years. Due to its incapacity to pay its debts, the nation is presently categorized as being in debt distress.

 

“The IMF is currently precluded from providing financial support to Zimbabwe due to its unsustainable debt situation based on the IMF’s Debt Sustainability Analysis (DSA) and official external arrears,

 

“An IMF financial external debt, including the clearance of arrears and reform plan that is consistent with durably restoring macroeconomic stability, enhancing inclusive growth, lowering poverty and strengthening economic governance,” Maliszewski said.

 

 

With few exceptions, the government’s ability to obtain foreign loans has been impeded by its unmanageable debt, as guarantees are not provided.
The buildup of arrears in foreign payments rendered Zimbabwe ineligible for the funding window and the general resources account, according to the IMF.

Apart from halting the disbursements of the nation’s current loan facilities, the World Bank (WB), the African Development Bank, and established creditors from the Paris Club, among other international funders, who typically follow the IMF’s lead, also declared the country ineligible for further loans.
The nation is no longer able to access international financial markets due to its inability to service its international debt.

Accessing the domestic debt market offers a prudent substitute and shields the nation from foreign exchange risk; but, it may displace private sector borrowing, impeding investment and production growth.

The nation has been facing significant macroeconomic challenges that significantly impede the economy’s ability to function. However, the unsustainable debt and arrears owed to the World Bank, the African Development Bank, and other international financiers have prevented the nation from obtaining loans from foreign lenders.
For the administration of President Emmerson Mnangagwa, it is time to take action.

 

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