Back to Index

Understanding the HIPC initiative and its implications for Zimbabwe
Zimbabwe Coalition on Debt and Development (ZIMCODD)
February 01, 2010

Download this document
- Acrobat PDF version (124KB)
If you do not have the free Acrobat reader on your computer, download it from the Adobe website by clicking here.

Introduction

Zimbabwe currently is saddled with an unsustainably high level of debt, estimated to be US$5,7 Billion, owed to various multilateral and bilateral creditors. According to analysts, arrears and interest constitute above 50 percent of the debt. Furthermore, the debt could balloon to US$7 billion by 2011 according to some projections, if is not addressed and reduced in a consistent and systematic fashion. The government is formulating an optimal and sustainable debt strategy consistent with the broader macroeconomic policy objectives of the country.

Four debt and arrears clearance options are widely reported to be under consideration. These are
(i) Internal resource inflows, (ii) Resource based debt restructuring (iii) Paris Club Debt restructuring and (iv) Highly Indebted Poor Country Initiative (HIPC). The proposal on HIPC specifically has raised some debate, as some stakeholders believe that HIPC will facilitate foreign interference in the country's economic and political affairs, as well as project the country as an economic basket case.

As a social and economic justice network, focusing on the debt problem the Zimbabwe Coalition on Debt and Development (ZIMCODD) would like to contribute constructively to policy consultations in search of a lasting solution to the country's debt problem. Civic organisations focusing on the debt view unsustainable public debt as the biggest threat to citizens' realization of social and economic rights. This is because countries have to forgo financing of development plans, and social sectors such as health, and education for the sake of servicing debts. To illustrate this point, an analysis done by ZIMCODD on the social effects of public debt in Zimbabwe shows that government expenditure on social welfare reached a peak of 40 times as much as expenditure on social welfare between 1996 and 2001.

The World Bank and International Monetary Fund (IMF) launched HIPC, a creditor initiated debt relief mechanism, in 1996. It provides debt relief and low-interest loans to cancel or reduce external debt repayments to sustainable levels. An enhanced form of HIPC was launched in 1999 (HIPC II), and recently extended through the Multilateral Debt Relief Initiative (MDRI) in 2005. These initiatives were developed with the aim of addressing the external debt problems of many developing countries. The majority of African countries external debt has remained a major obstacle to development. As of September 2009, the HIPC program had identified 40 countries (29 of which are in Sub-Saharan Africa) as being potentially eligible to receive debt relief.

Download full document

Visit the ZIMCODD fact sheet

Please credit www.kubatana.net if you make use of material from this website. This work is licensed under a Creative Commons License unless stated otherwise.

TOP