LEGAL think tank, Veritas has urged Finance minister Mthuli Ncube to adhere to a March High Court order compelling the official to place a limit on public borrowing and amend the Public Debt Management Act accordingly.
The Zimbabwe Coalition on Debt and Development (Zimcodd) applied to the High Court in April 2022 together with Henry Kane, Chioneso Kanoyangwa and Alice Kuveya, arguing that Ncube frequently issued guarantees and contracted debt from the Consolidated Revenue Fund without seeking parliamentary clearance.
In March, the High Court ruled that in accordance with Section 11(2) of the Public Debt Management Act, Ncube must submit a motion or include public borrowing limits in the Finance Bill to parliament for approval within 12 months.
Uncontrolled borrowing has been a bane on the government that has been accused of using this method to control its exorbitant expenditure, raising the money supply and adding inflationary pressures.
“Amendment of the law will bring greater transparency and accountability to the management of public finances and will restore the role of Parliament, as the representative of the people, in overseeing how State resources are used,” Veritas said, in a write-up last week.
“We look forward to the government and Parliament taking immediate steps to implement the High Court order, which according to the court order must be implemented before 15th March 2024.”
Veritas commended Zimcodd for taking the court case and that Ncube and the Attorney-General should also be commended for consenting to it.
“The Minister of Finance must, within 12 months, propose a limit for public borrowing envisaged in section 11 of the Public Finance Management Act. The minister is already obliged to do this by section 300 of the constitution as read with section 11 of the Public Debt Management Act,” Veritas said.
According to Veritas, the proposed amendment to the Bill, amending the Public Debt Management Act must outline the role of Parliament in approving state loans and guarantees before they are contracted.
“This is a big change. The existing law requires parliamentary approval to be given after loans and guarantees have been contracted. If the new Bill is enacted, Parliament’s prior approval will be needed. It must set out limits on state guarantees for the purposes of section 300 of the constitution. The Act already sets out these limits, as we have indicated above,” Veritas said.
“It must lay down the procedure by which Parliament ratifies or rejects loans and guarantees. This is new. It will be useful to lay down the procedure in a statute if Parliament has to approve loan and guarantee agreements before the government concludes them. The procedures will presumably cover such things as consultations between the ministry of Finance and parliament’s committee on public accounts.”
Veritas said that the proposed Bill must also lay down a procedure by which the State regularly updates Parliament on its debts, loans and guarantees.
“The constitution already obliges the Minister of Finance to update Parliament at least twice a year, but more frequent and more detailed updating will be helpful,” Veritas said.
The court's order is significant because it obligates the government to change the law to require parliamentary approval of state loans and guarantees before the government gives them. It also ensures that parliament is better informed of state financial obligations and is more actively involved in the management of state finances.
This comes as public debt is now estimated at over US$20 billion, if backed loans from the African Export-Import Bank and China are added to the US$17,63 billion as of the end of September 2022.