ZIMBABWE will not take the Heavily Indebted Poor Country (HIPC) route as it still has economic indicators that do not qualify it into the grouping, an official in the Ministry of Finance and Economic Development has said. Mrs Martha Mugweni, who works in the Ministry of Finance’s Aid and Debt Management Office, last week said becoming a HIPC was not automatic as it depends on some economic indicators.
Mrs Mugweni was representing Finance Minister Professor Mthuli Ncube at the Zimbabwe high level debt conference in the capital.
As at December 31, 2018, the country’s total debt stood at US$16,6 billion with the external debt at US$$8,16 billion, representing 33,2 percent of GDP.
Mrs Mugweni said an improved GDP to debt from the days of dollarisation (2009), prevents the country from being characterised as HIPC.
She revealed that Government was working flat-out to clear the debt to sustainable levels, which will in turn induce economic stability and growth.
“HIPC is not automatic; it depends on some economic indicators. When we moved from Zimdollar in 2009, our GDP numbers improved and our debt numbers lowered,” said Mrs Mugweni.
“GDP ratio to debt improved, which shows that we cannot qualify for HIPC because there are thresholds which make a country qualify.
“But when we look at it technically as a country, we are saying even if our GDP numbers have improved, we are still not sustainable, we need to clear our arrears.”
Mrs Mugweni said Government plans to direct the 2 percent intermediated tax towards budget financing.
Critically, Government has stopped issuing Treasury Bills to promote fiscal discipline and contain the debt levels.
Said Mrs Mugweni: “From October when the 2 percent was introduced, as an office we are not going to the market to borrow, we are using that money to finance the budget and at the same time we are not issuing any Treasury Bills, indicating that it’s a positive move and we are hoping we can maintain that.”
Mrs Mugweni revealed that Government believes using commercial loans for debt cancellation will not save the country from debt, but was looking at accessing soft loans or grants to speed up the debt clearance process to access fresh capital from multilateral institutions.
“Indications are that if we use commercial loans to clear our arrears, the problem we are having will never end. We need either a very soft loan or a grant.
“That would be the best option but we are saying failure to that, maybe we will approach the G7, they can give us a soft loan that has IDA (International Development Association) terms, which means it will have zero interest with only service fee of 0,75 percent which we can use,” she said.
The World Bank, the International Monetary Fund (IMF) and other multilateral, bilateral and commercial creditors, began HIPC initiative in 1996, with the aim of the world’s poorest countries were not overwhelmed by unmanageable or unsustainable debt burdens.
The HIPC initiative reduces the debt of countries meeting strict criteria, and reports show that the HIPC and related Multilateral Debt Relief Initiative (MDRI) programs have relieved 36 participating countries of US$99 billion in debt.