Economic revival empty without re-engagement

Zimbabwe, saddled with an $8bn external debt, needs International Monetary Fund and World Bank support to revive the economy, but getting it will be difficult because the country is in serious arrears, analysts have said.

The government, through the ministry of finance and the Reserve Bank of Zimbabwe, has made overtures to the two key monetary institutions but, up to now, nothing tangible has come of it.

In early November, finance minister Patrick Chinamasa pleaded for IMF help as the government fought to improve an economy characterised by poor liquidity, massive company closures, a virtually empty treasury and high unemployment.

Chinamasa called on the IMF to be “open-minded with the unique situation that Zimbabwe finds itself in”, and met a delegation from the financial institution.

“They should have some flexibility in particular. Of course, we are saying we would abide by the staff monitoring programme but would wish for an injection of new money,” said Chinamasa.

The IMF has already agreed on a staff monitored programme ending this month that includes several benchmarks the government has to honour. But critics say, with the year at an end, there is no evidence that it has met those expectations. The June deadline to ensure diamond revenue flowed into treasury was missed, for example.

Economist Eric Bloch told The Zimbabwean that it would be an uphill task to get international financing in the near future.

“It is critically important for the government to engage the IMF, World Bank and the African Development Bank, but the task is very, very difficult because of the massive arrears to all the three institutions, which are limited in what they can do because of the debts,” said Bloch.

“You can’t talk of a speedy solution to the problem, and whatever success government will make will be over an extended period,” he added.

Bloch said there was need for the financial institutions to reschedule the timeframes during which Zimbabwe must offset its debts and possibly forgive part of the arrears, “but we need to do the right thing as a country”.

Financial consultant and banker Omen Muza said Zimbabwe’s success in engaging the three institutions depended on how it fared on the benchmarks.

“Right now, it is not clear how the government has performed regarding the IMF’s SMP and it will be interesting to see how it had fared by the end of December, which was set as the deadline.”

The IMF and the World Bank withdrew cheap finance from Zimbabwe more than a decade ago when the government fell into serious arrears.

Muza questioned why the Zimbabwe Agenda for Socio-Economic Transformation, which the Zanu (PF) government is using as a blueprint to revive the economy, has skirted around the issue of re-engagement with the three institutions. He added that the country needed to reconsider its foreign relations.

“Politics is very important here. Remember, the IMF is a western institution and its thinking and attitude is dominated by western governments, the US included. There is no way in which our government can engage the IMF for example and tell the west to go to hell,” he added.

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