Development Finance, Private and Public Sectors in Zimbabwe: sustainability or odious debt?

This paper reviews the political economy of development finance in Zimbabwe from thelate 1980s to the present day, to see where the current sovereign debt arose from. Itdisaggregates initial private sector development interventions by type, provider, sectorand at the firm level, to see how development finance was extended and spent duringthe structural adjustment era and after. It notes a number of design flaws and problemsin development-financed projects and programmes over the period which underminedtheir later profitability as productive assets and contributed to debt build-up. The paperalso notes the effects of poor domestic governance on the productivity of venturessupported. However, the macroeconomic policies within the structural adjustmentprogramme were also a central trigger to the future unsustainability of debt. Also, in thepost-2000 period, the deterioration of the debt position has been exacerbated by theReserve Bank of Zimbabwe, by means of its extensive foreign exchange denominatedloans to parastatal corporations, and by its quasi-fiscal activities. Zimbabwe’s publicsovereign debt can be reduced, and future private sector development policy enhanced,if recourse to expensive and unproductive fiscal interventions, either by internationalfinancial institutions or by the Reserve Bank, are avoided.