HARARE Zimbabwes protracted political dispute has cost the country the opportunity to benefit from a 230 million (about US$335 million) facility unveiled by the European Union last week to enable African, Caribbean and Pacific (ACP) nations ride out the current global economic crisis.
The EU left out Zimbabwe from the list of 13 ACP countries that would receive between US$6 and US$51million each to cushion them from a recession that has seen most economies performing below expectations. The European Commission approved the first financing decisions in favour of eleven African and two Caribbean countries for a total of 230 million, including 215 million (US$313 million) under the so-called Vulnerability Support for Fluctuations in Export Earnings (V-FLEX) mechanism.
This is the first package of financing decisions in the framework of the 500 million (US$728 million) V-FLEX mechanism which was adopted in August 2009 as a response to the economic crisis for ACP countries. Announcing the bail-out package, EU commissioner for development and humanitarian aid Karel De Gucht said developing countries were hardest
hit by the crisis due to their poor resilience to external shocks. This has left funding gaps in many ACP governments’ budgets, said De Gutch. The Vulnerability FLEX mechanism is a short-term instrument supporting the most vulnerable ACP countries to cope with the impact of the global financial and economic crisis and to mitigate its social consequences.
The first countries to benefit from the V-FLEX mechanism will be Benin, Burundi, the Central African Republic, the Comoros, Ghana, Grenada, Guinea Bissau, Haiti, Malawi, Mauritius, the Seychelles, Sierra Leone and Zambia. For this first tranche, all amounts are paid in form of budget support which would enable the 13 countries to maintain their levels of public
spending in priority areas, including in the social sectors, without jeopardising macroeconomic stability. Most of the funds are expected to be paid before the end of this year, with additional allocations to follow in 2010. The instrument against vulnerability works pre-emptively, based on forecasts of fiscal losses and other vulnerability criteria, helping to ease the impact rather than acting after the damage is done. The V-FLEX facility provides rapid and targeted grants and is acting as a complement to the loan-based assistance of World Bank, International Monetary Fund and other regional development banks with whose support it was developed.
Based on the criteria for assistance Zimbabwe would qualify for aid under the facility, given that the southern African country is currently facing problems financing its economic reconstruction programme. The 2010 national budget unveiled by Finance Minister Tendai Biti early this month exposed a huge funding gap that the new Harare regime is supposed to plug through elusive foreign budgetary support.
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