Uncovering Zimbabwe’s debt
6.2 Traditional debt relief through the Paris Club Zimbabwe could ask for debt relief from the Paris Club group of rich countries without joining HIPC. However, it would not get any multilateral, private or other bilateral debts cancelled and it would have to start making payments on any remaining debt owed to Paris Club countries. Furthermore, the Paris Club require a debtor country to be implementing an IMF programme – new loans and economic conditions – before considering debt relief. Such an option has the same downside as HIPC but would cancel less debt and lead to higher debt repayments.
Campaigners give the Paris Club a red card as the group of rich country creditors marked its anniversary in 2006.
6.3 Continue default Zimbabwe is currently in default on many of its loans. The government could continue to be in default. The main financial cost would be to continue to not be able to access new loans from lenders such as the IMF and World Bank, western governments and private lenders. However, as this report has shown, many of these loans can be of questionable benefit. However, the Zimbabwean government has continued to contract new loans of dubious benefit from China. These threaten to repeat past mistakes of overreliance on foreign borrowing rather than using domestic resources, and using foreign borrowing for activities which will not create the return with which to pay them. Future Zimbabwean governments could find themselves in a similar power relationship with China as the government of the 1990s was with lenders from the western world.
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