HARARE - Zimbabwe’s failure to service its principal debt has resulted in the worsening economic situation in the country, economic experts say.
The experts contend that the country’s debt, which recently ballooned to $9,9 billion has dented Zimbabwe’s access to international funding and is hampering development as the country cannot borrow to spur economic growth.
According to government, the country’s Gross Domestic Product was expected to grow by 6,1 percent this year, but the figure was slashed to 2,0 percent by the World Bank, reflecting the impact of adverse weather conditions on agriculture, erratic electricity supply, and tight liquidity conditions.
Finance minister Patrick Chinamasa last week, said government was negotiating with its external creditors as a way of finding lasting solutions to the debt situation.
“This debt overhang is a very inhibiting factor to securing fresh money, mobilising fresh money, fresh resources. It’s a matter that we are seized with to see that it’s tackled and it’s going to be a process of course,” he said.
Zimbabwe is still emerging from a decade of economic decline and hyperinflation, but the economy is stuttering in the aftermath of a disputed election in July last year that has extended President Robert Mugabe's 33-year rule.
The southern African country last year began an International Monetary Fund (IMF) monitoring programme that could pave way for the country to clear its debts, as the economy grapples with chronic power cuts and a crippled manufacturing sector.
However, the country risks missing its staff monitored programme due declining economic situation characterised by low aggregate demand, declining revenue base and liquidity challenges among others.
Economist Tinashe Chinyani said it was important to consider the ability of government to generate future revenue to offset the current debt stock.
“The ability of the Zimbabwean government to service its debt is a function of the vibrancy of its revenue model, implying therefore that the economy must keep growing, broadening the tax base whilst a rational civil service reform needs to be implemented to conserve cash and improve the debt servicing,” he said.
Chinyani noted that the disposal and commercialisation of loss-making parastatals needs to be prioritised, and equally, the tightly regulated industries such as telecommunications needed to be further liberalised so that government generates more revenue from taxation.
Other economists, however, say government must create a stable investment climate that will also stimulate economic growth.
“If companies can’t borrow they can’t produce or manufacture much and the country ends up importing more than it exports. Without export earnings, the country’s ability to service its debts is severely affected and this is more-so for a country like Zimbabwe that is dependent on a borrowed currency,” said an economist with a local bank.