By Daniel Chigundu
Finance and Economic Development Minister Patrick Chinamasa says the government is considering assuming about US$500 million worth of bills that were written off by local authorities. The government in 2013 ordered local authorities in the country to cancel all household outstanding bills from February 2009 to June 2013 as a way of addressing the alleged shambolic billing methods that were being used.
The cancellation, however, left most local authorities in huge challenges as they could not effectively provide critical services such as water, refuse collection, road maintenance among many others owing to lack of finances. Addressing a local government investment conference, Minister Chinamasa said the government needs to find practical ways of assisting affected local authorities.
“Cancellation of bills will never happen again, US$500 million was lost through cancellation, and we need to find ways to assist affected councils.
“And we are considering practical ways of doing this, and one of the ways we might be doing this is to assume the debt as government,” he said
The government has been using a debt assumption strategy as a way of making its various debt ridden parastatals attractive to potential investors.
Just recently Cabinet approved the assumption of over US$1 billion worth of debts that have been accumulated by critical state enterprises in a bid to bring them back in line. Some of the enterprises earmarked to benefit from the approval include Air Zimbabwe (US$334 million), National Railways of Zimbabwe (US$200million), Zisco Steel (US$374 million) and Civil Aviation Authority of Zimbabwe. The government has already taken over about US$1.35 billion worth of Reserve Bank of Zimbabwe debts.
The debt assumption will have a huge effect on the country’s huge debt overhang which is said to be around US$11.3 billion of which US$4billion is domestic debt.
Meanwhile, Minister Chinamasa has urged local authorities to adhere to the government directive on the allocation ratio of funds.
“Local authorities should never forget that their role is to provide reliable, affordable and quality service to our people and not enriching a few individuals!
“Government, therefore, expects local authorities to comply with the directive by the Ministry of Local Government, Public Works and National Housing that I will restate: 30% of the budget – employment costs; and 70% of the budget – should go towards service delivery.
“I am pleased that some councils and municipalities have started complying with the said directive. I implore the non-compliant authorities to follow suit,” he said.
The Finance Minister also revealed that government will assist those local authorities, whose finances are in order and currently being well-managed to invest in infrastructure development, adding his ministry stand ready to give them borrowing powers duly signed by Treasury and; the Ministry of Local Government, Public Works and National Housing.-ENDS