FINANCE minister Mthuli Ncube yesterday called for reform of the G20 framework, advocating the suspension of all interest payments when a country initiates debt restructuring.
This, according to him, would enable the country to allocate funds towards other essential programmes while undergoing the debt relief process.
The framework was intended to deal with insolvency and protracted liquidity problems, along with the implementation of an International Monetary Fund (IMF)-supported reform programme.
The G20 members include Argentina, Australia, Brazil, Canada, China, France, Germany, Japan, India, Indonesia, Italy, Mexico, Russia, South Africa, Saudi Arabia, South Korea, Turkey, the United Kingdom, the United States and the European Union.
Zimbabwe owes external creditors more than US$12 billion and is working to extinguish that to unlock fresh lines of credit to help reboot the economy.
“Debt restructuring initiatives and more effective implementation of debt relief programmes, such as the G20 framework, will free up financial resources which can be channelled towards industrialisation, driving economic progress and development,” Ncube said during the 7th Sadc Industrialisation Week and Exhibition in Harare yesterday.
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“We have argued in other fora globally that the G20 framework needs to be reformed so that when a country enters the process or begins restructuring its debt relief process, all interest payments should be suspended so that it can fund other programmes while it is restructuring its debt.”
The Finance minister also noted that the global financial architecture is tilted against developing countries.
“Let me turn more broadly to reforming the global financial architecture to support our development and our industrialisation. The global financial architecture is tilted against developing countries, from a low share of SDR [special drawing right] quotas, that were exempted by the IMF, to higher coupon rates in the dual interest rate system,” Ncube said.
He said the tightness of the credit markets was prejudicing access to capital for industrialisation for development and hampering the progress of development that is much needed.
“But also, I must say that the tenure of most of the available finance global systems needs to be more concessionary. It needs to be scaled up. It needs to be more accessible. It needs to be longer term,” Ncube said.
“We need 40-year capital, not 10-year capital, so the capital should be provided to scale, more concessionary, more accessible and more long-term. Therefore, it is imperative, fellow vice-presidents and colleagues that Sadc should speak with one voice.
“And we should support the common voice for the reform of the global financial architecture for the benefit of our industrialisation agenda.”
Ncube said one of the most urgent tasks was to change the prevailing negative perception concerning the investment climate in the region by providing potential investors and balanced information about the opportunities and risks of investing in African countries.
“The major challenges facing the region to industrialise include the lack of long-term finance, macroeconomic instabilities, and limited fiscal space to address gaps, economic enablers, coupled with long-term and high in official development support,” he said.
In this regard, attracting foreign direct investment and intra-Sadc investment will enable the productive capabilities of the region and promote macroeconomic convergence and integration of financial markets, as well as build capacity to participate in continental and global value chains.
“This will enable the regional transitions from exports of unprocessed natural resources, primary products, into processed high-value goods and services.”
Ncube said it was apparent that developing countries were grappling with heightened debt vulnerabilities, as indicated by subdued solvency and liquidity indicators.