Today: April 22, 2024

Zimbabwe’s Mnangagwa piles on public debt in second-term bid

Winning or losing an election is generally a referendum on the economy by citizens. More often than not politicians are aware of this fact and therefore go out of their way, sometimes, contracting huge debts to power their way to re-election or extend their tenure in office. However, sometimes it leaves their countries in precarious economic positions.

Zimbabwe is going for watershed general elections in 2023 pitting the incumbent President Emmerson Mnangagwa against MDC Alliance Nelson Chamisa. Mnangagwa got into power initially via a coup in November 2017 and subsequently narrowly won the controversial July 2018 poll.

Zimbabwe was in a serious debt situation. It had started defaulting on its multi-lateral international debts totalling US$7 billion at the time in 2000. This meant the country had to source new sources of foreign investments at a premium.

In a bid to avert total economic implosion it turned to China and Russia in the so-called Look East policy. The West had long stopped extending loans to the southern African country in addition to economic sanctions imposed to force the country to democratise.

Since the economy was not performing, Zimbabwe mortgaged its natural resources such as mineral rights to the lenders in exchange for fresh debts. For a time, this strategy seemed to have worked but in reality, the country is now deeper in debt than it was before.

Zimbabwe’s debt according to Treasury data is at an unsustainable over 70% of its Gross Domestic Product (GDP) and rising by the day.

It has to be noted at this juncture that the regional grouping, Sadc, advises that national/sovereign debt should not breach 60% of GDP for sustainable economic growth.

It is an established economic solution that when the economy is down governments stimulate economic growth through quantitative easing, printing money for infrastructure projects that can spur economic growth such as roads, railways, bridges and airports.

Zimbabwe is no exception but unfortunately, it can’t rely on its printing press as it is always working hard to control the twin challenges of inflation and runaway exchange rate against the US dollar.

It, therefore, relies on external debts. And naturally, China with significant foreign currency reserves estimated at more than a trillion US dollars is the go-to country. This is made easier by China’s own Silk Road Belt initiative.

Mnangagwa with his eye on 2023 general elections, on Thursday, October 7, 2021, revealed his ambitious campaign strategy disguised as a State of the Nation Address and opening of the fourth session of the Ninth Parliament.

Mnangagwa in his slightly over 3 000 words speech made some ambitious promises to the electorate in its different demographics. The promises ranged from accelerated infrastructure development to increased government-supported farming programmes.

He further promised pensions, disability claims and income-generating projects for veterans of the liberation struggle and a new revised pension scheme for parliamentarians.

The infrastructure programmes included refurbishment and expansion of airports, dualisation and resealing of all trunk roads and housing estates for civil servants.

On agriculture, Mnangagwa’s government promised farm mechanisation, irrigation equipment and inputs under the controversial Command Agriculture programme whose funding is murky.

In 2018, The Auditor-General in her audit report noted that US$3,2 billion had been used for the programme without being appropriated by parliament.

All in all, the Mnangagwa administration had used US$10,2 billion without parliamentary approval and is still seeking condonation through a Finance Adjustment Bill that is still to be passed by the legislature.

It remains unclear how the new promises would be funded until Treasury tables the 2022 national budget proposals in parliament sometime in November.

However, it is no rocket science that these projects will be funded through loans from China, which so far in the last decade has poured in some US$3 billion towards new electricity generation plants at Kariba and Hwange, airports expansion at Robert Mugabe and Victoria Falls international airports, roads dualisation, upgrading of state-owned mobile telecommunications company, NetOne, and refurbishment of the capital city Harare’s water treatment plant.

Mnangagwa in his Sona said: “Government has prioritised capital spending, with 34% of total expenditure to date, having been earmarked for infrastructure development.

The ongoing Phase 2 of the Emergency Road Rehabilitation Programme is indeed transformational across all provinces, districts, cities and towns.”

Mnangagwa is not the first leader to try to prolong his tenure in office through state largesse. Similar stories have been experienced in South Africa under Jacob Zuma and Zambia under Edgar Lungu, respectively.

These leaders were prepared to drown their countries in debt so long it guaranteed their continued stay in power.
Zuma and Lungu invested in infrastructure projects mainly funded by debt from pension funds or China.

They ran down their countries’ credit ratings to junkie status.

Mnangagwa seems not deterred to follow in their footsteps as he relentlessly pursues the dream of creating an upper-middle-class economy for Zimbabwe by 2030.

The bigger question for opposition and civil society is how are they holding the Mnangagwa administration accountable on debt contraction? Do they see the Zimbabwe debt crisis resolvable in the next decade or so?

As Zimbabwe’s parliament readies itself to debate Mnangagwa’s speech in the coming weeks, it is important that legislators bear in mind the question of debt and democracy.

The issue that unsustainable debt is a threat to democracy and socio-economic development as austerity would certainly be implemented with a lot of casualties.

For now, with Mnangagwa’s party enjoying a two-thirds majority in parliament it seems highly unlikely that parliament will stop him in his tracks. It, therefore, falls on the opposition, labour and civil society to use both political and legal measures to stop Mnangagwa from further indebting Zimbabwe to China.

Without a concerted effort from the aforementioned groups, Zimbabwe will find itself in a debt trap within the next three years where it cannot extricate itself.

Mnangagwa should be stopped from ballooning Zimbabwe’s sovereign debt in exchange for prolonging his tenure.

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