Draft legislation seeking parliamentary approval for Government to take over the huge debt of the Reserve Bank of Zimbabwe has been gazetted. In The House with John Makamure The Reserve Bank of Zimbabwe (Debt Assumption) Bill seeks to provide for settlement of certain liabilities incurred by the central bank before December 31 2008 amounting to a whopping $1,12 billion. Upon gazetting, a Bill is automatically referred to the relevant portfolio committee of the National Assembly. In this case, the relevant committee is the Portfolio Committee on Finance and Economic Development chaired by Zanu PF’s David Chapfika. Members of this committee have therefore assumed the responsibility to provide leadership to the other legislators in order for any public policies enacted around debt issues to conform to the Constitution and the principles of sound fiscal management. The $1,12 billion that Government will take over comprise 27% of the 2014 total budget of $4,1 billion or 8% of projected Gross Domestic Product (GDP) in 2014. What this means is that a large amount of our national income is going towards payment of debt at the expense of investment in productive economic activities and social services delivery in critical sectors of health and education. The opportunity cost of debt assumption is therefore an enormous one at a time when the economy is choking under the weight of limited fiscal space and ballooning external debt. Patrick Chinamasa, Minister of Finance and Economic Development, announced in the 2014 Budget Statement that external debt stood at $6,1 billion as of December 2012. This translates into 49% of nominal GDP projected at $14 billion this year. The country’s external debt arrears stand at $4,72 billion or almost 40% of GDP. The arrears are more than the revenues that the country is capable of generating annually. Basically, the accumulation of arrears more than our revenues has plunged the country into a serious debt trap that it cannot escape from unless debt relief is sought from creditors. Looking at the schedule of debts to be taken over, it is clear that some of these liabilities benefitted individuals and companies that have nothing to do with provision of public services. It defies economic logic for Government to simply write-off these debts. Taxpayers cannot subsidise debt obligations of private interests. These individuals and companies must pay back in the spirit of economic justice and in order to lessen the burden on the fiscus. I would not have any problems with my taxes going towards payment of debt that was incurred to buy drugs for our hospitals and clinics than to pay for the acquisition of capital equipment for the benefit of a private citizen not providing a public good or service. And what does the Constitution say about issues of loan contraction? One of the principles of public financial management as outlined under Section 298 is that public borrowing and all transactions involving the national debt must be carried out transparently and in the best interests of Zimbabwe. The MPs must therefore fully satisfy themselves that all the information pertaining to the assumption of the RBZ debt has been disclosed. The Bill must be accompanied by detailed information on what the loans were used for in the interest of transparency. We also have Section 300 that requires Parliament to enact a law that sets limits on borrowings by the State, the public debt and debts and obligations whose payment or repayment is guaranteed by the State. The limits must not be exceeded without the authority of the National Assembly. This law is long overdue in order for Parliament to exercise effective oversight on how the Executive mortgages the country’s future resources. At the moment there are no legal set limits on public debt, meaning the Government can continue to incur liabilities at will. Section 300 goes on to say that an Act of Parliament must prescribe precise terms and conditions under which the Government may guarantee loans. The enactment of such a law will go a long way in avoiding situations like debt assumptions that are not in the public interest. Clause 4 of the Bill that confers power on the Minister of Finance to fix terms and conditions under which he assumes responsibility for prior Reserve Bank debt is in my opinion not a good provision. This provision should have empowered Members of Parliament, as representatives of the people, to determine the terms and conditions as these are public funds. Parliament should therefore thoroughly scrutinise the Reserve Bank of Zimbabwe (Debt Assumption) Bill in order to promote more informed debate and the formulation of public policies that will promote productive and sustainable loan contraction in Zimbabwe. And because debt assumption will have to be financed by taxpayers, they must be given an opportunity to make their voices heard through public hearings convened by the portfolio committee. John Makamure is the Executive Director of the Southern African Parliamentary Support Trust writing in his personal capacity. Feedback: john.makamure@gmail.com