Uncovering Zimbabwe’s debt
In the face of increasing protest in Zimbabwe at the worsening situation, in 1997 the ZANU-PF government sought to maintain itself in power through unbudgeted spending increases for war veterans, and joining the war in the Democratic Republic of Congo. In November 1997, there was a huge devaluation of the Zimbabwean dollar as foreign speculative private money fled the country. The unbudgeted spending increases and devaluation started a cycle of inflation and crisis. From the end of the 1990s, dissatisfied war veterans and poor rural households suffering from increasing poverty and inequality began occupying white owned farms, sometimes forcefully. The government came to back the occupations as another means to maintain power. In 2000, the rapidly increasing size of Zimbabwe’s debt led the government to default. The hyperinflation caused by continued unbudgeted spending and
Graph 1.
printing of money destabilised the economy, which shrank through the decade. By July 2008 monthly inflation had reached 231 million per cent. Since 2009 and the complete replacement of Zimbabwe’s currency with the US dollar and South African Rand, the economy has been recovering. The one remaining source of foreign loans is the Chinese government. For example, in 2011 an agreement was signed on a loan in Chinese Yuan worth around US$100 million for Zimbabwe to build a defence college. Such loans replicate much of previous bad lending and borrowing; given for unproductive projects tied to the purchase of that country’s exports. Since 1980 Zimbabwe has been lent US$7.7 billion but repaid US$11.4 billion. Yet the Southern African country is still said today to have a debt in excess of US$7 billion (see Graph 1. below).1
Foreign loans disbursed to Zimbabwe government and debt repayments, 1980-2009 (US$ million, current prices)2 External loans to Zimbabwean government Debt repayments by Zimbabwean government
1000
US$ million, current prices
900 800 700 600 500 400 300 200 100 0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Year
7