Published: 04 July 2014

Government is working on legislation that will facilitate the setting up of a debt management office to monitor the country's debt and minimize frivolous borrowing in state enterprises and local councils.

This is a bid to make sure that the country's $10 billion debt is settled and that it does not grow through excessive borrowing.

Addressing journalists at a press briefing in Harare, Finance and Economic Development minister Patrick Chinamasa said the framework for the bill had already been approved by cabinet.

"The measures that we have taken as we go into the future are to make sure that we have an institution which monitors debt obligations. Through legislation we are going to create a debt management office in this ministry and this will be under the supervision of the secretary for Finance who will be responsible for government debt, lending and guarantees including local councils and public enterprises debt," he said.

He said the debt management office would maintain a database of all public and publicly guaranteed external debts, formulate a debt management strategy and prepare annual borrowing plans.

The formulation of the bill will put a cap on excessive borrowings that contributed to the country's huge external debt.

Minister Chinamasa said this would result in centralized borrowing for all public entities.

"We feel that the power to borrow should reside in a single authority. We should not have a situation where everybody is signing on debt instruments and we only get to know about them after they have been signed.

"The legislation will make it clear that the minister of Finance will be the single authority to borrow money, so any borrowing by a local authority or parastatal must receive our approval. We will have any debt that is incurred by a public entity in the database. It is not something we are going to discover haphazardly," he said.

He added that the legislation puts a limit on the amount to be borrowed and any need to exceed limits will have to be approved by parliament depending on the urgency and importance of the reason.

Minister Chinamasa said Zimbabwe's public external debt stands at $5 billion and debt guaranteed by government is $1,3 billion. The Reserve bank of Zimbabwe's $596 million external debt brings the tota public and publicly guaranteed external debt to $6,9 billion.

He said the private sector's external debt stands at $1,9 billion bringing the total external debt to $8,9 billion.

A domestic debt of $994 million brings the total amount owed by Zimbabwe to $9,9 billion.

"Total public and publicly guaranteed external debt at end-2013 was 54 percent of GDP, of which 43 percetn of GDP were arrears. Zimbabwe's overdue financial obligations to the worlf bank, African development bank, European investment bank and the IMF Amount to $2 billion," he said.

he said a debt resolution strategy would unlock new financing from multilateral and bilateral creditors.
- BH24

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