'Zim can only reap bailout benefits after sacrifice'

HARARE - Zimbabwe can only reap benefits of an economic bailout package after comprehensive reform sacrifices, economists have said.

This comes after the IMF has said it wants Zimbabwe to clear its arrears to the World Bank, the African Development Bank (AfDB) and European Investment Bank (EIB) and the $4 billion it owes the Paris Club of sovereign nations, push through more budget cuts and implement a series of long-agreed austerity reforms before they agree on a new bailout the country desperately needs to avert bankruptcy.

Zimbabwe’s bilateral and multilateral partners have grown increasingly exasperated with its repeated fiscal slippages and delays on reforms and want to see progress before they wrap up any bailout package.

This comes after Zimbabwe has turned the page after the fall of despot Robert Mugabe, with the successor regime of President Emmerson Mnangagwa eyeing probably the biggest-ever financial rescue package in almost two decades.

Zimbabwe has endured one of the worst recessions in economic history, with the new administration frantically trying to shake off its international pariah tag.

Marking the official start of what he has called a Second Republic, Mnangagwa has said Zimbabwe was beginning a new chapter after “very difficult” years and was now “open for business.”

Britain, Zimbabwe’s former colonial master and Mnangagwa’s perceived key ally, has said it will underwrite the southern African country’s drive to be admitted onto the interim IMF staff programme to help the country quickly clear its foreign arrears.

Outgoing British ambassador Catriona Laing said her country will do everything in its power to help Zimbabwe be admitted into the IMF staff monitored programme — an agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic programme.

“We are here to give that support to try and encourage a process back to an IMF programme, perhaps through an interim staff monitoring program as soon as possible,” Laing told reporters last week.

She said this would enable Zimbabwe “to start a serious dialogue” around the clearance of the arrears.

On Friday, top government officials met with investors in New York in search for cash that would clear the arrears. Repayment would unlock more cash from multilateral lenders and is necessary to tap other sources of development financing.

Some 100 international investors, institutions and hedge funds attended the meeting, led by Mnangagwa, held on the side-lines of the United Nations General Assembly in the Big Apple.

Newly-appointed Finance minister Mthuli Ncube, a former banker, said in a social media post after the investor conference in New York that investors had expressed massive interest in Zimbabwe.

“At the oversubscribed Zimbabwe Investor Forum, over 100 American investors including Morgan Stanley, Bank of America, Merill Lynch, JP Morgan showed interest in bringing capital to the newly-reformed Zimbabwe,” Ncube said.

“His Excellency, … Mnangagwa assured the American investors that their investments will be safe in Zimbabwe. Zimbabwe will never be the same again.”

This comes after IMF spokesperson Gerry Rice told a regular IMF media briefing last week that it had noted Britain’s pledge to support Zimbabwe to get an interim IMF programme to help the country quickly clear its foreign arrears.

“What I would say is we see the new administration of president Mnangagwa has expressed commitment to strong economic reforms and supporting reforms will require a comprehensive stabilisation and structural reform programme from the authorities and financial support from the international community to provide space for these reforms,” Rice said.

“Where the IMF is, we stand ready to help the authorities design a reform package that can help facilitate the clearance of external payment arrears to international development banks and bilateral official creditors and that then would open the way for fresh financing from the internal community including potentially the IMF.

“But, again, just to stress as we said before, potential financial support from the Fund is conditional on the clearance of those arrears to the World Bank, the AfDB and financing assurances from bilateral official creditors. We are working with the Zimbabwean authorities in the meantime to provide policy advice and technical assistance that might help, could help move that process forward.”

Reserve Bank governor John Mangudya has said the government would try to negotiate some of the points on the list but repeated that Harare urgently needed the bailout loan to stay afloat.

“We are looking at many options,” Mangudya said, adding “One year from now, our wish and our hope and prayer is that we would have cleared our arrears.”

Veteran economist John Robertson said Zimbabwe should implement the reforms called for by the IMF not because it’s required to, but because it recognises that they will help it emerge from the crisis.

He said the Washington-based fund was willing to help, but government required stronger ownership of the adjustment programme.

“I can say with certainty that everyone, including the IMF, is ready to help us do the right things to qualify for financial help. But we are first required to do the right things.

“It is not enough to promise to do the right things. We have to actually do them,” Robertson told the Daily News.

“When we do carry out the reforms, we will qualify to be considered for the possibility of assistance, if we can accept the conditions that they will impose to ensure the assistance will be used to increase our chances of success.

“In other words, any assistance for which we qualify will come with conditions that we use that assistance carefully enough to be deserving of that help.”

He said Zimbabwe will be most deserving of help if it successfully restores or rebuild its own productive capacity and show determination to work our way out of debt.

“So, work — physical production — is needed to generate exports and reduce imports. Adding to production volumes will call for investment inflows, so government’s first challenge is to increase investor confidence.”

Robertson said the best foundation for investor confidence is made up of respect for property rights and a highly supportive approach to investment applications.

“The current mix of controls and the imposition of requirements for approvals, licenses and permits, plus the restrictions affecting labour costs, foreign exchange movements, fees, dividends and loans, have made Zimbabwe one of the least attractive investment destinations on Earth.

They have crippled the country, but we are crippled by self-inflicted handicaps. We alone can remove them and we must remove them as fast as possible,” the leading economist said.

Stephen Chan, a professor of world politics at the School of Oriental and African Studies at the University of London, told the Daily News: “The key phrase is ‘reform package’. That is a serious phrase.”

While the government has been effusive about the re-engagement, analysts apparently do not share that enthusiasm. Years of hardships and worsening economic problems  have battered the country’s confidence and sapped its happiness.

Piers Pigou, the southern Africa director of the International Crisis Group, told the Daily News there is simply nothing new here.

“It is simply a reiteration of a position that has to all intents and purposes not changed since the Lima Process was initiated almost three years ago,” he said referring to an arrears repayment plan at the IMF/World Bank annual meetings in Peru’s capital Lima where consensus was reached with creditors on a repayment strategy which entailed the clearance of the country’s $1,8 billion arrears to the two Bretton Woods institutions.

“The renewed publicity and emphasis of support from the UK is part and parcel of a broader set of efforts to promote and scaffold confidence in Mnangagwa’s government.

“It is understandable, but will have little traction unless there are some serious tangible moves that clearly demonstrate this government is walking its talk,” Pigou told the Daily News.

This comes as relations between the UK and Zimbabwe have moved to a new level since the fall of Mugabe as London seeks to revive relations with a key ally in southern Africa.

The UK has been intensifying efforts in building stronger ties with Zimbabwe in reducing poverty, helping in health, education, environment, energy and recently has been giving cash transfers to help the most vulnerable, including older people, vulnerable children and people with disabilities — to boost its influence.

Diplomatic ties between the UK and Zimbabwe soured during the turn of the century over charges that Mugabe’s ruling Zanu PF party had rigged elections and used violence to cling to power.

Since the toppling of Mugabe, relations have significantly thawed, with British conglomerates that had divested from Zimbabwe during the 2000-2008 period at the height of an economic crisis, put off by Britain’s frosty ties with its former colony after Mugabe’s often-violent grab of commercial farms belonging to white farmers, mulling returning back.

Richard Mahomva, a political scientist with an avid interest in political theory, public policy and a governance major, said the economic inventions of the IMF and the World Bank are overrated.

“Our indulgence with these institutions must have fundamental ideological terms of condition, lest we are complacent actors of their traditional capital-centred motives in Africa,” he told the Daily News.

“For all the policy acumen they have postured, to this day these institutions have no substantial development evidence they have to show with regards to Africa’s development besides the infamous Economic Structural Adjustments Programmes (Esap) of the 90s.

“So the IMF’s recharged interest in Zimbabwe must not be confused for benevolence especially at a time the Brexit has left Britain with no other option, but to look to the global-South to reinvigorate its capital margins.”

Mahomva continued: “It will be naive to celebrate Britain’s opening up to Zimbabwe under such circumstances. As a country, we must seek the comparative advantage that is motivating the Britton institutions to re-engage.

“Our reciprocation to their terms must not violate our mandate to indigenise the economy and uplift the livelihoods of the people outside their prescribed terms of exchange. The relationship to ensue must be transactional and going beyond elitist grandstanding at the expense of enduring national values and interests.”

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