In a statement issued after the IMF's first assessment of Zimbabwe's
economic conditions in two years, the Fund advised Harare to stick to a
strict economic austerity diet and clear its arrears before unlocking
new aid from the Bretton Woods institution and other multilateral
lenders.
An IMF delegation that concluded a two-week mission to Zimbabwe last
week said Harare should take bold steps to restructure the economy in
order to ensure growth and reduce poverty.
As with previous assessments since 2000, the IMF was unequivocal in its
demands for a sustained economic revival programme aimed at containing
runaway government expenditure while reviving business confidence.
It pledged its readiness to assist the unity government between
President Robert Mugabe and former opposition leader Morgan Tsvangirai
through policy advice but technical and financial assistance to
Zimbabwe would depend on establishing a track record of sound policy
implementation, donor support and a resolution of overdue financial
obligations to official creditors.
"Going forward, strengthening the investment climate, ensuring
protection of property rights, and maintaining wages at competitive
levels will all be essential for increasing domestic and foreign
investment," the Fund said.
Short Term Recovery Programme
Analysts observed last week that the issue of implementing a sound
economic package was well within Zimbabwe's reach following the launch
of the Short Term Emergency Recovery Programme on March 19.
The major challenge would be the ability of the coalition government to
adhere to the recovery programme without giving in to Mugabe's populist
policies that the veteran leader has used over the years to placate his
parasitic supporters.
The IMF was particularly concerned about the government's ability to
resist off-budget expenditures by (Reserve Bank of Zimbabwe governor
Gideon) Gono and the propensity by Mugabe to use the central bank to
fund his campaigns, said a Ministry of Finance official privy to
discussions between the Fund and government officials.
Gono is accused of single-handedly sabotaging the Zimbabwean economy by printing money to fund Mugabe's political activities.
It was during his tenure as RBZ governor that Zimbabwe's inflation shot out of control from three-digit figures to quadrillions.
The country's inflation has eased during the past three months
following the relaxation of exchange control regulations to allow
companies to sell goods and services in hard currency.
Mounting debts
The IMF delegation cited Harare’s mounting debts to the IMF as the main
obstacle to the resumption of talks on balance-of-payments support.
Zimbabwe owed the Fund more than 89 million Special Drawing Rights
(SDRs) at the end of February, which translated to US$135 million as of
last Thursday.
SDRs are a unit of account used by the IMF and other multilateral
financial institutions to denominate transactions by member states.
The value of the SDR changes daily and is linked to a basket of major currencies used in international trade and finance.
The IMF suspended economic aid to Zimbabwe in 1999, citing lack of
political will to resolve the country’s deepening economic crisis.
Since then the government has defaulted several times on its
commitments on previous IMF and other foreign loans because of a
critical shortage of foreign currency.
Bulawayo-based economist Eric Bloch said it was impossible for Zimbabwe
to clear its arrears to the IMF and other lenders without assistance
from the donor community.
We cannot repay the arrears at this moment and what we need is a
programme of rescheduling the debt while we look for funding, Bloch
said.
Rule of law
Other sticky issues that came up during the IMF visit to Zimbabwe
included the need for the Harare authorities to end human rights
abuses, uphold the rule of law and implement a legal, transparent and
rational land reform programme.
Zimbabwe's case was not helped by the news of a fresh wave of invasion
of white-owned commercial farms by supporters of Mugabe's Zanu (PF)
party during the time the IMF team was in the country.
University of Zimbabwe political scientist Eldred Masunungure said the
emotive land reform programme could prove the deal breaker as far as
winning back international financial assistance.
He warned of a potential conflict within the unity government over
continued farm invasions after Mugabe denied that illegal farm
occupations were continuing despite evidence of invasions of
white-owned land.
The Movement for Democratic Change of Prime Minister Morgan Tsvangirai has voiced concern over the illegal farm occupations.
Unless those with the authority face this problem squarely, the land
reform programme could end up being the Achilles' heel for the unity
government, Masunungure told The Zimbabwean On Sunday.
Security of tenure
Bloch said there was need to modify the land reform programme in a
manner that would guarantee security of tenure and restore viability in
the agricultural sector.
This could be done by either making sure the 99-year leases have some
level of negotiability or returning the land to free-hold status, the
economist said.
Under the current arrangement, all land acquired from white farmers is
designated state land and the 99-year leases given to resettled farmers
are not transferable which means they are not usable as collateral
security when borrowing.
Most resettled farmers have therefore relied on government support to
finance farming activities since the land reform programme started in
2000.
The IMF cut balance-of-payments support to Zimbabwe in October 1999
following a dispute with Mugabe over fiscal policy and governance
issues.
The IMF’s suspension of balance-of-payments support to Zimbabwe has
blocked billions of dollars worth of aid from other donors and worsened
hard currency and fuel shortages that brought Zimbabwe’s manufacturing
base to its knees.