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Zimbabwe should refuse to repay colonial debt

10 Jul 2021 at 10:56hrs | Views
THE Zimbabwean government is currently engaging with its creditors in order to reduce its external debt burden.

Economic watchers argue that the country would be justified in repudiating the debt it inherited from the colonial era since there is no customary international law that obliges Zimbabwe to assume responsibility for the colonial era debt.

The first democratically-elected government had good reason to invoke the odious debt doctrine which states that debt incurred by a despotic regime should not be honoured by a constitutional successor government.

The current negotiations may, therefore, provide an opportunity for Zimbabwe to remind the international community of its odious inheritance as it seeks to negotiate down its current debt load. It has been suggested that much of this debt merits non-payment on account of its odiousness.

That is, the debt was contracted without the consent of the vast majority of Zimbabweans, it failed to benefit them, and creditors were fully aware of these facts when the loans were granted to the minority settler government led by Ian Smith in its final years.

At independence in 1980, Zimbabwe inherited a US$700 million debt from the Rhodesian government; the result of United Nations sanctions busting loans to the white regime to buy arms during the war, a war in which thousands of natives perished in defence of their birthright.

The then new Prime Minister Robert Mugabe gave in to pressure from the international community to inherit the debt in return for a Marshall Plan for Zimbabwe of over US$2 billion in grants for post-war reconstruction and development.

This inherited, unjust debt was short-term and high interest; imposing a large repayment burden on taxpayers in the early 1980s just as drought struck.

In the absence of significant grant aid to deal with the drought and fund post-civil war reconstruction, Zimbabwe relied on loans to buy imports.

The country's large debt burden was thus created and put into motion, creating a generational albatross.

Out of the inherited US$700 million, nearly US$600 million was owed to private lenders, while US$100 million was owed to bilateral creditors, and just over US$5 million to multilateral lenders.

Much of this debt had been accumulated during the later years of the Rhodesian regime, after it had been ostracised by the international community and repeatedly denounced as "illegal" by both the UN General Assembly and the Security Council.

Member States were repeatedly ordered not to recognise the regime or to aid its survival in any way. In fact, most of the pre-independence loans sourced from private creditors were granted in violation of sanctions imposed on Rhodesia by the UN Security Council, hence would have been in breach of international law.

In a resolution of May 1968, the Security Council, in addition to requiring UN members and their nationals to cease trading activities with Rhodesia, banned any financial dealings with the regime. Therefore, any creditor who lent funds to the Smith government was acting unlawfully.

In the same vein, debt incurred by Rhodesia before the Unilateral Declaration of Independence in respect of a World Bank project has been condemned as odious.

The World Bank made a number of substantial loans when the country formed part of the Federation of Rhodesia and Nyasaland (incorporating modern-day Zimbabwe, Zambia and Malawi) in the early 1950s.

In total, the World Bank lent US$140 million for a variety of projects, including the construction of the Kariba Dam.

So burdensome did repayment of that debt become that the Smith government absconded from repaying it, with the result that: "Kariba represented not only the largest inland dam of its era, but also the largest ever default by a government on a World Bank project".

Throughout the 1980s, Zimbabwe borrowed from international lenders, supposedly to invest in productive activities. Many of these projects were of dubious benefit, such as World Bank loans to plant trees in areas where local people already had enough wood for their energy needs.

Through the 1980s, poverty fell. But by the end of the decade, debt repayments equalled 25% of Zimbabwe's exports and 25% of government revenue. Despite this, the World Bank ironically stated that Zimbabwe had avoided a "damaging build-up of external debt".

In reality, the only way Zimbabwe could keep paying was to receive new loans to pay old loans, heralding the emergency of a debt trap. With private banks less willing to lend to the country, the debt-burdened government was effectively bailed out by new loans from international institutions, particularly the World Bank and the International Monetary Fund (IMF).

These structural adjustment loans were not for investment in any particular project, but used to repay old and growing debt. The structural adjustment loans were linked to Zimbabwe bringing in policies such as cuts in government spending, trade liberalisation, deregulation of prices, devaluation of the exchange rate and relaxation of labour laws.

Such policies certainly had support within the government, and were presented as homegrown, but were in fact a requirement of the lenders.

It is estimated that US$750 million of Zimbabwe's debt comes directly from structural adjustment loans by the World Bank and IMF.

Zimbabwe's debts to international financial institutions stand at more than US$8,1 billion.

Much of the debt, about US$5,9 billion is accumulated arrears, penalties and interest on arrears, which means that the principal debt itself is just US$2,2 billion.

Given that a sizeable chunk of that debt is arguably odious, there is need for a debt audit to kick-start the cancellation of part of this burden the country is saddled with.

Source - newsday
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