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Zimbabwe: New government will face major debt challenge

Civil society coalition calls for democratic audit of $9 billion debt

The Zimbabwe Coalition on Debt and Development (ZIMCODD), in a statement released today, have called for a new government to hold an official public audit into the country’s debt, and for lenders such as the UK government and IMF to take part in an audit and release all information on the loans they have given in the past.

The Zimbabwean government owes $9 billion in ‘external debt’;[1] money that is owed to foreign governments, international institutions and foreign private creditors. It is in default on most of these debts, so debt payments are relatively low; around $15 million a year, 0.5 per cent of government revenue.[2]

In June 2013, Zimbabwe’s coalition government agreed a programme with the IMF which could be a first step towards entering the IMF and World Bank debt relief scheme. However, this would actually increase Zimbabwe’s debt payments, require the country to take out more loans, and make a new government follow IMF and World Bank economic policies (See below).

The Zimbabwe Coalition on Debt and Development say in a statement released on 30 July 2013, that:
“Zimbabwe’s debt should be resolved, but not in a way that means higher payments, more lending, and no increase in the accountability of lenders and the government. Instead a public debt audit would be a first step towards a just resolution of the debt, and greater democracy and accountability.”[3]

The loans were from the 1980s and 1990s. At least $750 million of debt comes directly from structural adjustment loans from the IMF, World Bank and African Development Bank which bailed out reckless lenders, lowered economic growth and increased unemployment. In 2004 the World Bank acknowledged that structural adjustment in the 1990s in Zimbabwe “largely failed. Social progress slowed, per capita incomes declined and poverty increased.”[4]

Other loans which continue to make-up some of Zimbabwe’s debt include:
•    Loans from the UK government between 1998 and 2000 for police Land Rover vehicles, which were later used in internal repression
•    Loans from the World Bank for tree plantations to create fuel supplies. However, the World Bank failed to realise there was already plenty of wood available, and there was no economic return on the plantations.
•    Loans from the Spanish government for the Zimbabwe government to buy Spanish military aircraft.
•    UK unspecified ‘aid’ loans which were tied to buying exports from British companies.[5]

In June 2013, the International Monetary Fund agreed a ‘Staff Monitored Program’ with Zimbabwe’s coalition government. Under this programme, no money changes hands, but Zimbabwe has to follow economic policy conditions set by the IMF. If they complete the programme, it could be the first step towards Zimbabwe entering the Heavily Indebted Poor Countries initiative, in late 2013 or early 2014.

HIPC offers the possibility of cancelling some of the debts, but only on condition that Zimbabwe:
•    Start making other debt payments again. It would therefore cost the Zimbabwean government money to enter the HIPC scheme, as happening in the Democratic Republic of Congo.
•    Follow IMF and World Bank economic policy conditions. In Tanzania this meant privatising a water system which later collapsed, and the World Bank has acknowledged “was unable to meet many of its targets and obligations from the start”. In Malawi it meant selling off a grain reserve, prior to a food crisis
•    Take out new loans from the IMF, World Bank and African Development Bank.

Tim Jones, Policy Officer at Jubilee Debt Campaign, says:
“Rather than rushing into a debt relief process and IMF conditions, Zimbabweans need a debt audit to examine where the debt came from and how to prevent a debt crisis arising again. In the 1990s, the debt crisis and IMF economic conditions forced on the country caused poverty and unemployment to increase, and economic growth to collapse. The IMF has no legitimacy to force economic policies on Zimbabwe.

“The main reason for Zimbabwe to seek HIPC debt relief is to become eligible for new loans again. There is a danger these loans will repeat the country’s history of debt crisis. A debt audit can work out what loans are needed for, and how to prevent them from once again increasing poverty and inequality.”

An official public debt audit could be set-up by the Zimbabwean parliament. It would publicly assess what loans were used for which resulted in the current debt, who loans benefited and their legality and legitimacy.

In 2008, following elections, the Ecuadorian government held an official public audit into its debt, finding that many of the contracts had been signed illegally. Following the revolution, the Tunisian government has announced it intends to carry out an official debt audit. The Norwegian government is currently auditing the debts owed to it.

For more information, and to arrange an interview with either the Zimbabwe Coalition on Debt and Development or Jubilee Debt Campaign, contact Tim Jones on +44 20 7324 4725.

Ends

Notes for editors

[1] IMF. (2013). Zimbabwe: Staff Monitored Program. International Monetary Fund. 10/06/13.

[2] Calculated from World Bank. Global Development Finance database.

[3] The statement from ZIMCODD is available here

[4] World Bank Operations Evaluation Department. (2004). Zimbabwe: Country Assistance Evaluation. 18/08/04.

[5] For more on the origins of Zimbabwe’s debt, see Jubilee Debt Campaign’s report ‘Uncovering Zimbabwe’s debt: The case for a democratic solution to the unjust debt burden’


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