November 19, 2020


Zimbabwe's odious debts: At a time when the country is grappling with Covid-19 and acute droughts, can debt cancellation save its economy? (Kudzai Chimhangwa, 11/18/20, openDemocracy)

The debt burden of most African countries to Bretton Woods institutions and the Paris Club has for years continued to limit their capacity to get external development finance. This in turn defeats the idea of market liberalism and export diversification strongly advocated for by these international lenders.

Worse effects of such debts are lower national income, lower national savings and diminished tax revenue. Through commitment to reforms, currently being demanded of Zimbabwe, government would be compelled to spend most collected revenue on servicing national debts. The problem lies in that the country remains in arrears without a solid repayment plan. [...]

Government is currently implementing a transitional stabilization plan (TSP) which is anchored on the IMF's Article IV consultations and technical assistance. Minister Ncube claims the TSP has met most indicators with the fiscal and current account deficits having been eradicated. The issuance of treasury bills is supposedly now on budget while the public sector wage bill is now below 50% of total government revenues from 92% in 2017.

These austerity measures have come at a great cost to citizens. Civil servants are now earning salaries below the poverty datum line, with medical doctors embarking on industrial action and teachers reporting incapacitation to return to work. The Zimbabwe Coalition on Debt and Development (ZIMCODD) recently called for the country's debt cancellation and warned that failure to do so would push more people into extreme poverty.

ZIMCODD notes that the country really needs cancellation at a time when it is grappling with the effects of COVID-19, acute droughts, pervasive corruption, poor governance and the high debt overhang.

The Asian tiger economies have proven that export led growth could pull them out of poverty in less than 50 years. The tiger economies include Singapore, South Korea, Taiwan and Hong Kong. Over the course of years of serious industrialization, coupled with setting up advanced financial and trading centers, the Asian tigers kept budget deficits within financial limits. These measures led to stable macro economies.

Hong Kong, Singapore and Taiwan never had foreign debt during this boom.

Perhaps, with debt cancellation, these booming economies' growth models could work for countries now stuck in mounting debts.

No nation ought ever honor the debt obligations incurred by an undemocratic regime.

Posted by at November 19, 2020 12:00 AM


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