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Finance and Economic Development Minister Patrick Chinamasa (centre) addresses journalists during a Press briefing yesterday flanked by his deputy Dr Samuel Undenge (left) and head of the Debt Management Office in the ministry Mr Andrew Bvumbe

Tinashe Makichi  Business Reporter
Government is considering coming up with a Bill that gives the Minister of Finance and Economic Development sole authority to sign off and issue Government guarantees for loans sourced by local councils and public enterprises, a senior Government official said.
This comes after Government revised its domestic and external debt to $9,9 billion from the $6,6 billion announced at the end of December last year.

The 33,3 percent increase in the debt was a result of increased borrowing by Government institutions for the construction of different infrastructural projects.

Domestic debt rose to $1 billion by June 25, 2014 from $994 million as at December 31, 2013 after public enterprises borrowed without approval resulting in Government assuming some of the debts.

Finance and Economic Development Minister Patrick Chinamasa yesterday told journalists that Cabinet has already approved the principles of the Bill that will see Government also provide for the setting up of a Debt Management Office responsible for negotiating and re-negotiating with creditors on Government loans.

“Subject to Section 30 of the Constitution, the Minister of Finance and Economic Development shall have sole authority to borrow money on behalf of Government by concluding loan agreements, issuing securities or entering supplier’s credit agreements and issuing guarantees.

“The minister shall have sole authority to sign loan and supplier credit agreements,” Minister Chinamasa said.

All local councils and public enterprises that intend to borrow money under a Government guarantee are supposed to get approval from the Finance Ministry.

The debt management office will assess the risks involved in issuing any guarantees, including assessing the capacity of the beneficiary of the guarantee to repay the loan and preparing reports on the method used for each assessment.

Minister Chinamasa said private sector companies who intend to borrow under Government guarantee will have to follow the same procedure.

“The ministry will only approve borrowing of funds for national priority infrastructure and productive sector projects for instance water, road construction and power generation.

“Local councils should bring borrowing requests to the Finance Ministry after having consulted their line minister. And that is the procedure to be followed,” Minister Chinamasa said.

Government is going to evaluate projects to ensure that borrowed funds are used for the intended purpose while at the same time preparing annual reports on the debt of local councils and public enterprises.

In this regard, he said there is going to be a limit on advances from the Central Bank to the Government and a Debt Management Committee shall each year set the maximum amount of new Government borrowing and guarantees, which may be undertaken throughout the year.

Minister Chinamasa said a lot of progress has been made in constructing a computerised Government external and domestic debt database and they have completed the validation and reconciliation of the debt.

As at year ended December 2013, Zimbabwe’s total external debt amounted to $8,915 billion while public external debt constituted 56 percent with publicly guaranteed debt sitting at 15 percent.

Reserve Bank of Zimbabwe external debt was seven percent ($596 million), while private sector non-guaranteed debt was at 22 percent.

However, Government has assumed the RBZ domestic debt through the issuance of Government bonds amounting to $754 million.

Zimbabwe’s outstanding public and publicly guaranteed external debt (including RBZ’s external debt) stood at $6,9 billion as at December 2013 representing a 54 percent of Gross Domestic Product in nominal terms.

Private sector external debt stood at $1,9 billion as at December 2013,consisting of $1 billion long-term and $950 million short-term debt.

“Although private sector borrowing has steadily been growing since 2009, none of it is in arrears,” said Minister Chinamasa.

The stock of accumulated arrears is sitting at $5,6 billion (80 percent), of which penalty interest accrued was about $1,1 billion (16 percent).

Total multilateral debt stood at $2,58 billion and outstanding areas amounted to $2,12 billion.

Minister Chinamasa therefore said Government is making frantic efforts to engage its creditors on how to repay the debts.

“Zimbabwe is in debt distress, with arrears to most of its creditors continuing to accumulate and there is no doubt that the country’s debt overhang has become a serious impediment to the Zimbabwe Agenda for Socio-Economic Transformation.

“Debt resolution will improve the country’s credit rating and in the process attract new foreign direct investment,” he said.