Zimbabwe: A HIPC?

Zimbabwe is in economic freefall and social turmoil. Is becoming a HIPC the answer Zimbabweans need?

Both external and internal voices have begun calling for the Zimbabwean government to make strides to becoming a Highly Indebted Poor Country (HIPC) and as such, will enable itself to be granted loans from the Bretton Woods institutions that can be used in its economic recovery.

The currant situation is that Zimbabwe currently owes $5.7 billion in external debt, this represents a massive 192% of the country’s GDP. Furthermore, $3.8 billion of this debt is owed from arrears (interest on debt not paid) causing the IMF to predict debts of $13 billion by 2013. Such a dire outlook is leaving many looking towards the international financial bodies of the IMF and World Bank.

Where becoming a HIPC may win great loans for Zimbabwe in the short term there is much to suggest that the long term picture may become even worse if such actions were taken. Ms Naess-Holmes speaking at a workshop organised by the Zimbabwe Coalition on debt and Development warned,

“Zimbabwe should be careful of going into the HIPIC path… under HIPC debt can actually increase”.

Pointing out a need to be wary of the Structural Adjusment Policies of the IMF, Lawyer Zviko Chadambuka also argues that HIPC is not the way to go.

"HIPC has in fact been viewed as having served as a weak bribe-the promise of minimal cancellation after long delay and damaging SAP’s” (Structural Adjustment Programmes).

With vast debts already in place accepting IMF and World Bank loans making mandatory economic changes such as privatisation of the state could further weaken Zimbabwe. Essentially increasing the detrimental effects on the economy by creating simply more debt through new loans which are supposed to help pay off old ones.

This in turn will further weaken social services as government money is divereted to pay arrears. The Zimbabweans could lose control of their economy due to private foreign investment  due to the impacts of SAP's. Such an image does not paint a picture of hope for relief from the burdens and effects of debt in the future.

Others such as ZIMCODD’s Rutendo Hadebe have called for a comprehensive audit of the debt rather than the country’s participation in the HIPC Initiative.

“There has been much irresponsible lending”.

The Jubilee Debt Campaign sees this debt as illegitimate and unjust. Such arrears are robbing the country of the little money it has which are needed for the running of public services. We support the call by ZIMCODD for an audit of this debt to ascertain the legitimacy of this debt.

 

See how the reality of auditing may be coming true in Brazil

 

and Jubilee Debt Campigns support for this through our directors letter.