IT WAS none to pleasing for citizens when news broke out in November that the central bank would soon offload its debts to taxpayers.
The bank plans to transfer several billions of the debt it holds to the Ministry of Finance and Economic Development after completing a debt consolidation exercise. The debt reportedly dates back two decades, related to post independence legacy debts, payment obligations for services to government and blocked funds.
This is not the first time. Between 2007 and 2008, the Reserve Bank of Zimbabwe designed a loan facility termed the Farm Mechanisation Programme, aimed at supporting commercial agriculture in the country. However, it emerged that the beneficiaries of the program, who were not identified, never paid back the loans. In July 2015, the government took liability of an estimated USD1.35 billion in debt incurred by the central bank before 2008.
The bad link between corruption and debt
With limited private sector opportunities in the country, public office appears to be the most viable means to wealth accumulation. According to an African Forum on Debt and Development policy paper, a large chunk of the debt in Zimbabwe is a result of high-level corruption and bad governance.
“Lack of transparency about how the government borrows and spends money leads to corruption and misuse of public money with the citizens losing out, but the same citizens expected to pay back the money through taxation,” said Dewa Mavhinga.
The conflation of state and party business has resulted in growing public debt. For instance, in 2014, when factional fights over power ascendancy raged in the ruling party, it later came to light that state power utility funds had been used to bank roll political campaign activities by former vice president, Joice Mujuru.
The latest subsidy program termed Command Agriculture is another scheme that threatens the country’s fiscal stability. It emerged that about USD3 billion was injected into Command Agriculture, a scheme to enhance the domestic production of food, outside of parliament and that money could not be accounted for.
The World Bank advises that strengthening governance remains critical towards supporting economic and social recovery, as well as building resilience in Zimbabwe.
“Governance plays a key role to ensure reform momentum and to establish the credibility and sustainability of a national development strategy,” the bank spokesperson said in emailed responses.
It remains imperative for national leadership and policymakers to find the political will to push for judiciousness in debt management, genuine anti-corruption policies and transparency in borrowing, eliminating the danger of excessive debt.