Home » Governance » Govt Tightens Screws On External Loans

The Government has tightened screws on external loans as it seeks to avoid locking Treasury to terms that are difficult to service, a senior official in the Ministry of Finance and Economic Development has said.

The requirements come into place as Government battles a global debt of plus $6 billion and as Treasury assumes the Reserve Bank of Zimbabwe’s $1,35 billion debt.

The RBZ debt assumed by Treasury is made up of a $596,02 million external debt, a domestic debt of $754,3 million and a domestic stock of $390 million. The Minister of Finance and Economic Development Patrick Chinamasa would be required to sign up on all external loans approved by the External Loans Co-ordinating Committee and ratified by Parliament in case of Government loans.

Private sector players requiring to borrow more than $1 million externally would be required to seek approval before the ELCC before accessing foreign credit. For Government external indebtedness, Parliament would be required to ratify the loans after approval by the ELCC.

The Permanent Secretary in the Finance and Economic Development Ministry Mr Willard Manungo told Parliamentarians last week that the arrangements for borrowing were fairly tight. “Any borrowing that will ultimately have a claim on the Consolidated Revenue Fund the Minister will have to sign on it. For any external indebtedness the Minister will have to sign up in terms of the loan agreements.

These will also have to come through Parliament for ratification,” said Mr Manungo.”We have an External Loans Co-ordinating Committee which is a joint committee of Treasury and the RBZ.

That committee has a criteria that it uses on interest rates and grace periods with regards to the borrowings. It looks at all external loans beyond Government including borrowings by the private sector. All the loan terms have to go through the ELCC for approval,” said Mr Manungo.

While Government focuses on debt relief Treasury was also considering insisting on concessional and longer repayment periods for external loans to avoid putting pressure on strained State cash flows.

“In Government, the focus is to try and ensure that as we aim to get debt relief, we try to ensure that the issue of concessional terms is one of the terms we are insisting on so that we do not engage into borrowings that we will not be immediately not be able to service,” said Mr Manungo.

He said a key component in the borrowings would be longer grace periods so that Government cash flows will be able to service the obligations that it commits itself to.

Source : The Herald