Golden Sibanda Harare Bureau
ZIMBABWE carries an estimated $4 billion private sector debt it needs to validate and service in order to open fresh lines of credit.
This indication comes against sentiment that part of the reason Zimbabwe’s private sector is not getting external loans was the government’s $6.8 billion overdue external debt overhang.
An official with the Ministry of Finance told a Parliament of Zimbabwe committee on budget and finance that private sector debt was estimated at $4 billion.
But she said the debt had not yet been validated, as happened with central government’s $6.8 billion foreign debt, the official nominal debt figure as at December 31, 2014.
“Private sector debt initial indications were that the figure is $4 billion, which we’re still validating,” said Martha Mugweni from the Ministry of Finance’s public debt management office during the parliamentary committee’s public hearing meeting on the Public Debt Management Bill last week.
However, Finance Minister Patrick Chinamasa is on record saying that there was no reason why the multilateral financial institutions were not supporting the local private sector.
He said the private sector had always met their external loans payment obligations and recently engaged the International Finance Corporation to consider investing in Zimbabwe.
Mugweni said the government’s domestic debt currently stands at $1.9 billion.
The government is working on a new public debt management bill to ensure transparency in accumulation of public debt, which tax payers have to pay for.
Giving the general outline of the bill and what it seeks to achieve, Mugweni said that once the bill has been passed into law, the legislation would set limits on the amount of loans that the minister of Finance can decide to borrow.
The Minister would be required to give reports to Parliament about public debt annually, with initial provisions that this be done once each year. Stakeholders want the reports at least twice a year.
Further, she said the new law proposes a limit on the amount that the minister is allowed to borrow, beyond which he must seek approval from parliament.
“Once the bill has been passed into law, the minister will be reporting all the debts to parliament and the public will be able to know how the borrowing was done.” This will apply to contraction of public and publicly guaranteed debts.
Acting chairperson of the parliamentary committee on budget and finance Eddie Cross said the public hearing session was third of six meetings planned in the northern part of the country with other six set for southern provinces.
He said the purpose was to “make provision for the public to make their views known on the new legislation,” through a report to be submitted to Parliament.
Last week’s public hearing session was dominated by input from officials from the Zimbabwe Coalition on Debt and Development, who among other issues want mechanisms to limit the autonomy and power of the minister in contracting public debt.
They said since the minister would have the sole authority to contract public debt, some checks and balances should be put in place to make the minister accountable to some authority, such as the public finance committee.
There also were calls to make sure that public authorities are held accountable by local communities and also seek their input prior to debt contraction.
Others called for specific percentage thresholds that guide the extent to which the minister can borrow over a given period to avoid huge debt contraction, a burden the tax payers and poor people eventually have to carry to have it paid off.
Calls were also made that provisions be incorporated in the new legislation to hold Minister of Finance accountable even after they leave office with a view to prevent reckless contraction of public debt and misuse of public funds.