EU approves US$20m aid package for Zim

In the first sign of thawing relations between Brussels and Harare, Zimbabwe was listed among 19 African, Caribbean and Pacific (ACP) countries that were allocated a total of 264 million (US$338 million) by the EU last Thursday under the European blocs so-called Vulnerability Support for Fluctuations in Export Earnings (V-FLEX)

mechanism.

The V-FLEX mechanism is the EU’s swift response to help countries most affected by the economic downturn due to their poor resilience to external shocks.

The EC announced last Thursday that it would provide upon their request support to Antigua & Barbuda, Benin, Burundi, Burkina Faso, Cape Verde, Central African Republic, Grenada, Guinea Bissau, Haiti, Lesotho, Liberia, Malawi, Democratic Republic of Congo (DRC), Samoa, Sierra Leone, Togo, Tonga, Tuvalu and Zimbabwe.

“Developing countries continue to face important difficulties, including funding gaps in their government’s budgets, as a direct consequence of the global financial crisis. This year, this EU mechanism will help 19 ACP countries maintain their level of public spending in priority areas, and therefore mitigate the social impact of the economic downturn,” EU Commissioner for Development Andris Piebalgs said.

The cash-strapped Harare regime received the fifth largest allocation after the DRC which got 50 million, Haiti 26 million, Lesotho 21 million and Malawi 19 million.

The V-FLEX mechanism is a demand-driven facility that targets countries with a high degree of economic, social and political vulnerability, the right policies in place to fight the crisis and sufficient absorptive capacity as well as a financing gap in their

budgets.

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.

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 acts 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 qualifies 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 exposed a US$800 million funding gap that the Harare regime is supposed to plug through elusive foreign budgetary support.

This was the second package of financing decisions in the framework of a 500 million (US$640 million) V-FLEX mechanism which was adopted in March 2009 as a response to the economic crisis for ACP countries.

15 countries have previously benefited from 236 million funding under V-FLEX: Benin, Burundi, the Central African Republic, the Comoros, Dominica, Ghana, Grenada, Guinea Bissau, Haiti, Malawi, Mauritius, the Seychelles, Sierra Leone, Solomon Island, and Zambia.

Zimbabwe was left out of the first round of disbursements in December last year due to the countrys protracted political dispute.

The snub by the EU came in the wake of deadlocked talks to break a stalemate between President Robert Mugabes Zanu (PF) and the MDC-T of Prime Minister Morgan Tsvangirai over outstanding power-sharing issues.

Mugabe has dug in on demands by the West and the MDC-T to allow far-reaching reforms in a country devastated by a decade of political strife and economic meltdown.

Zimbabwe and the EU are presently engaged in talks to normalise their ties which soured after the Europeans and their Western allies slapped visa restrictions on Mugabe and 200 of his Zanu (PF) lieutenants in 2002 following presidential polls allegedly stolen by the Zimbabwean strongman.