World Bank and Lazard’s bailout for a repressive regime

Finance minister Patrick Chinamasa

With a lot of fiddling and fudging by its friends at the African Development Bank, the African Development Fund, and ‘bridging loans’ from African Export and Import Bank (Afreximbank), Zimbabwe could raise about a third of the amount required. The amount owing to the IMF would be offset by $110 million from the IMF’s own Special Drawing Rights (SDRs). But that still leaves a shortfall of over $1.1 billion dollars owing to the World Bank Group: $896 million is owed to the International Bank for Reconstruction and Development (IBRD), and $216 million to its sister organisation, the International Development Association (IDA).

When it became evident that Algeria would not come on board with a $900 million loan to repay IBRD, Finance Minister Patrick Chinamasa was sent cap in hand to European capitals. At the time, The Economist made it clear that ‘bailing out bandits’ was a bad idea. But on his return, Mr Chinamasa confidently announced that “we had marathon meetings with the Afreximbank and Lazard, an international bank. They have put together a syndicate of banks to address the World Bank arrears. With this understanding and commitment from Afreximbank and Lazard, we are now definitely on course to fulfilling what we set out in our arrears clearance strategy.”

As it turns out, Lord Mandelson, the British peer who chairs Lazard International, had visited Zimbabwe in February. When in Zimbabwe he was escorted by Catriona Laing, the British Ambassador to Zimbabwe, to meet Mr Chinamasa. Ambassador Laing later issued a statement claiming that Lord Mandelson’s visit was purely to help Zimbabwe promote economic reforms, and had nothing to do with discussing a $1.1 billion loan to settle its arrears with the World Bank Group.

But when it emerged that Lazard was bailing out Mugabe, Kate Hoey, the British MP for Vauxhall and the chair of the All-Party Parliamentary Group on Zimbabwe, was outraged. She immediately called on British Foreign Secretary, Boris Johnson, to prevent Mandelson’s support for a bailout of the Mugabe regime, which she accuses of mismanagement, corruption, outright theft, oppression, and organised violence against opponents. Mr Chinamasa not only played a key role in destroying the independence of Zimbabwe’s judiciary in 2001, but grabbed farms for himself and his wife without paying compensation. As a long-time Mugabe loyalist, he was also one of the most senior figures on the European Union’s sanctions list.

In her article of 18 August, Ms Hoey called for an urgent response from Mr Johnson: “On Zimbabwe he must reaffirm Britain’s position in the most robust and colourful language he can command: no money, no bailout until Mugabe disappears from power and influence forever. … He should end any comforting pretence that better links with repressive regimes help to promote reform and liberalism. The weight of history is against this idea.”

But has the British MP’s appeal come too late? In late August it emerged that the IDA of the World Bank Group had produced a Turnaround Eligibility Note in July that justified providing Zimbabwe with a $300 million loan to help clear the $1.1 billion Zimbabwe owes in debt arrears to the World Bank Group. It specifically noted that the World Bank (IBRD) will be repaid $896 million “using a term facility syndicated by African Export and Import Bank and Lazard Frères”. The main justification for the loan was the novel suggestion that Mugabe and his ruling party were committed to fundamental policy change.

Todd Moss of the Center for Global Development immediately asked, Is the World Bank Excusing Mugabe’s Human Rights Abuses? The answer was perfectly obvious to Kate Hoey and to millions of Zimbabweans who have fled Mugabe’s misrule. An editorial in NewsDay on 1^st September, titled World Bank should not perpetuate repression, accused the West of appeasement and the World Bank of glossing over Zimbabwe’s problems: “This is a massive propaganda victory for the Mugabe regime, as the message would be that in spite of it all — lack of democracy and a clampdown on freedoms of speech and association — the World Bank is still prepared to do business with Mugabe. This reinforces the criticism of multi-lateral organisations that they only invoke democracy when it suits them and are willing to get into bed with the worst dictators if they have something to gain.”

Were it not so tragic, those who have suffered for decades under the yoke of Mugabe’s tyranny would laugh at the absurdity of the IDA’s claim that its proposed loan would “return the country to a sustainable development path”. Providing a bailout to our delinquent government on the promise of reforms is like giving money to a drunkard who, with hand on heart, promises never to let another drop pass his lips.  Just as the bailout will be a gift and another victory for Mugabe ahead of elections, it will be yet another betrayal of the people still struggling to find their feet in their fight for freedom.

What about Lazard’s complicity? Kate Hoey said that if she was a shareholder of Lazard, that she would query the value of Peter Mandelson to the bank.

Richard Haass, the President of the Council on Foreign Relations (CFR) in the United States, is also a director of Lazard. His associate on the CFR board is none other than Peter Ackerman, the founder of the International Center for Non-violent Conflict, which is dedicated to fighting autocrats like Mugabe and their authoritarian regimes. Another highly respected member of CFR is Fareed Zakaria who presents CNN’s popular international news programme, Global Public Square (GPS). One of his regular guests is Richard Haass. Perhaps in his next “What in the World” segment of GPS, Mr Zakaria can ask Mr Haass about Lazard’s shameful bailout of a blood-soaked dictator and his regime.

And Boris Johnson still needs to have that chat with Lord Mandelson.

Dale Doré is the Policy Director of Transform Zimbabwe