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External Debt Choking Zimbabwe’s Economic Recovery


A general view of the East Gate Mall building, located on the corner of Robert Mugabe and Sam Nujoma roads in Harare central business district (CBD), January 3, 2012.

A general view of the East Gate Mall building, located on the corner of Robert Mugabe and Sam Nujoma roads in Harare central business district (CBD), January 3, 2012.

Three years after the formation of Zimbabwe's coalition government, the country's economy is still trying to recover.

Cars have now returned to the streets of Harare and almost all shops are fully stocked. This was not the case prior to the formation of Zimbabwe’s coalition government in 2009. Streets were empty, so were shops. Everything was in short supply. It is more than three years down the line. Things have changed for the better.

But the country imports most of its products including bottled drinking water as industries are still struggling. Willard Manungo, the Ministry of Finance's permanent secretary, says Zimbabwe's huge external debt is the major hurdle.

"African Development Bank is a major, major player but when it comes to Zimbabwe, because we are in arrears, we become automatically ineligible to borrow from African Development Bank," he said. "The same situation with World Bank and other major cooperating partners. So the issue of arrears is limiting the capacity of some of the cooperating partners to cooperating with us.”

Zimbabwe’s external debt is now more than $10 billion and for more than a decade now the country has been in default resulting in major international lenders shunning the African country. The African Development Bank is owed more than $500 million.

Earlier this week the Zimbabwe finance minister said he was in talks with the International Monetary Fund and the World Bank to retire Zimbabwe’s debt. Manungo says the suspension of development aid to Zimbabwe was affecting the country's recovery.

"If you look at [the] number of development areas that we would want to go into in Zimbabwe - energy, infrastructure, water - I think those are all areas where if development assistance was as it was in the past, Zimbabwe would be seeing major support. So the scaling of global development financial flows is also having a major impact on Zimbabwe," he said.

Most Western nations such as the U.S., Germany and Britain suspended development assistance to Zimbabwe in 2002 after President Robert Mugabe’s government was accused of disregarding human rights and suppressing the opposition then led by Prime Minister Morgan Tsvangirai. The two are now in a power-sharing government but are tied up in quarrels about the drafting of a new constitution, which Tsvangirai's party says is needed to have a free and fair national election.
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