As Zimbabwe’s inclusive government, tasked with economic and political stabilization goes through its third year, the economy remains shaky whilst the outlook remains uncertain. The economy has stabilized, mainly due to the adoption of a basket of stable currencies but growth has remained sluggish due to a number of factors. On the back of slow growth in the productive sector, revenue authorities’ reported growth in revenue collections in the first quarter of 2011 is still below adequate fiscal requirement. Zimbabwe’s internal capacity to deal with its external debt, estimated to be $6.9 billion remains constrained in the short to medium term.
Government of Zimbabwe has reportedly adopted what it calls a hybrid strategy, comprising of the ‘best aspects’ of the Highly Indebted Poor Country Initiative (HIPC) and pledging of the country’s mineral resources. Under HIPC, a country receives cancellation of part of its debt if it meets certain sustainability criteria, and develops a Poverty Reduction Strategy Paper to link debt relief to poverty reduction. Government of Zimbabwe has also announced that a Debt Management Office is being set up within the Ministry of Finance. Whilst Zimbabwe searches for a solution for its indebtedness, the issue of unsustainable public debt continues to play out in other economies, creating intriguing parallels globally.
Of particular interest is the sovereign debt crisis of 2010 which involved some European states, notably Greece, Ireland, Portugal, and Spain which are members of the Eurozone. Briefly, financial markets raised alarm over the rising government deficits and increasing debt levels in these countries. This caused Europe’s finance ministers to facilitate a rescue package to maintain stability across Europe. Europe, in collaboration with the International Monetary Fund also stepped in with financial assistance for the troubled countries, conditional on the implementation of harsh austerity measures similar to what developing countries went through under the structural adjustment programs.
In this context, Jubilee UK and The Zimbabwe Coalition on Debt and Development would like to offer stakeholders information on the state of play with the Eurozone debt, and identify key lessons for Zimbabwe to learn from this crisis and its possible implication for this struggling southern African country. It is hoped that this brief will help to broaden the knowledge of policymakers on matters of public finance, especially management of public debt.
Read the full briefing here.