Accountability pressure group, the Zimbabwe Coalition For Debt and Development (ZIMCODD) has urged government to seek parliamentary approval for all loan contracts to promoting transparency and good governance.
In its last week statement titled The Curse of Resource Backed Loans on Zimbabweans, ZIMCODD expressed concern over the secrecy around loan contracts entered between the government of Zimbabwe and China which involved natural resources.
ZIMCODD’s remarks come on the back of revelations by Finance minister Professor Mthuli Ncube in parliament last week that Zimbabwe borrowed US$200 million in October 2006 for farm mechanization equipment.
The development advocacy group said the revelations by the government were worrying as only elites benefitted from the facility with government assuming the debt on behalf of the beneficiaries.
“The latest Treasury revelations should be of grave concern to all citizens who are trapped in a vicious circle of poverty as borrowed loans are used to benefit only the politically connected elites. Those who received farm equipment under the farm mechanization scheme did not repay back,” ZIMCODD said.
The organisation added that Zimbabwe was resorting to Resource Backed Loans (RBL) after falling out of favor with multilateral institutions such as the World Bank and International Monetary Fund whose loans are concessionary.
“As a result of failure to honor financial obligations when they fall due, Zimbabwe can no longer easily access concessionary borrowing from International Financial Institutions like the World Bank and African Development Bank (AFDB).
“The authorities have now resorted to RBLs to augment its domestic sources of finance. However, these RBLs are costly as a payment default may lead to appropriation of a country’s assets, one high-profile example being Sri Lanka which had to hand over a strategic port to Beijing in 2017 after it could not pay off its debt to Chinese companies,” ZIMCODD added.
The organisation recommended that all loan contract be taken to parliament and made public for scrutiny before approval to ensure transparency.
“Going forward all key terms of each loan contract should be approved by Parliament and be made public,” said ZIMCODD.
“An independent debt audit will inform the scale and nature of the country’s debts, which are often not transparently publicized. An audit will also become a building block to popularize discussion about the legitimacy of certain debts and whether they should be repaid,” the organisation added.
Zimbabwe’s external debt is estimated to be in excess of US$22 Billion. Government has been borrowing from China to fund development projects with such mortgaged to natural resources including gold, platinum and diamonds among others.
