RESERVE Bank of Zimbabwe governor Gideon Gono has been m
eeting diplomats in Harare in a bid to soften donors’ hardline position on Zimbabwe and to sell his monetary policy. The plan is to convince financiers that the country’s economic fortunes are changing for the better.
It appears Gono has been roped in by government to push its changing policy position from “we can go it alone” to courting Western financiers. But there are a myriad problems along the way for Zimbabwe.
Gono in his monetary policy statement launched last December said he would engage the World Bank and the International Monetary Fund.
“We will engage whoever we owe money. Yes we will approach the IMF and the World Bank to work out a plan to pay what we owe them,” said the governor.
Gono would like to widen his scope and approach traditional donor states like the European Union countries, the United Kingdom, Commonwealth countries and the United States.
However for Zimbabwe to get the much-needed balance of payment support from these countries there has to be a strong indication that President Robert Mugabe’s government is now committed to the rule of law and democracy.
Diplomats from donor states who attended one of Gono’s meetings last week said they were preparing an “appropriate response”. They said donors were looking beyond the monetary policy — towards government offering a total package that would include breaking the political impasse in the country and making a far reaching deal with the opposition before the holding of free and fair elections.
Economist John Robertson said Gono should concentrate on the exchange rate and boosting exports before approaching donors for balance of payments support.
“We cannot ask donors to be giving us foreign currency when we should be earning it from exports,” said Robertson.
He said the local currency was overvalued, which was killing exporters both big and small.
“We want donors to provide forex which we are failing to earn from exports. Once the exchange rate is right and exporters are happy we will need to borrow less,” he said.
Government wants a strong Zimbabwe dollar against the United States dollar. But analysts say this can only happen with improved availability of foreign currency to trade on the auction system.
“For now there will not be a sudden deluge of forex in the formal sector of the economy, which means someone has to fill in that gap,” an economist said.
This week agency reports quoted Information minister Jonathan Moyo — who usually mirrors Mugabe’s mind — as saying Zimbabwe would pay its US$270 million debt to the IMF to raise the country’s credit rating.
Ziana this week quoted Moyo as saying the IMF was impressed with Zimbabwe’s economic reforms and that he was confident the country would not be forced to withdraw its membership from the fund — another volte-face.
In his birthday interview with Newsnet two weeks ago, Mugabe said Zimbabwe could work with the World Bank and not the IMF.
“The bank can help us immensely, and we are working on how we can regain the assistance of the World Bank,” said Mugabe.
“I’m not sure with the IMF whether we are on good terms with them.
“I mean in financial terms, and we have paid our debts, whether we could go back to them and invite them to come and help us. I doubt because their ideas are completely wrong,” he said.
Analysts this week said Moyo’s statement was an admission that the country could not deal with the current economic crisis without bridging finance from multilateral lending agencies and donors.
But the changing mood won’t be enough to appease international financiers as long as President Mugabe’s government refuses to abandon its muddled policies which have seen the president taking cheap shots at the IMF, the World Bank and Western donors whenever it suits him.
Gono’s success with the Bretton Woods institutions and international donors depends on how these lenders are prepared to overlook Mugabe’s populist rhetoric about imperialists and their supporters and focus on the country’s potential.
President Mugabe’s government has defaulted on external debts of more than US$3,5 billion, while Mugabe has told the IMF “to go to hell”.
Analysts this week said Mugabe, whose party is facing an election in 12 months’ time, has been painted into a corner by growing dissatisfaction among the urban poor and the working class on the one hand, and the demands of Western financial institutions and the international community.
Mugabe, they said, was likely to continue pouring scorn on the West, the IMF and the World Bank and hope to open new markets among Asian Tigers, African and South American allies to shore up his image as a champion of the third world.
But there has been very little to show for this “look east” policy and South-South co-operation mantra as the country desperately seeks balance of payment support which started to dry up when Mugabe dragged the country into the DRC war in August 1998.
The situation was exacerbated when government embarked on an unplanned seizure of white commercial farms four years ago to stem an opposition MDC onslaught ahead of a parliamentary election in 2000. Donors took flight when government breached the principles of the October 1998 land donors’ conference which stipulated that land reform should be carried out in a transparent manner and aimed at poverty alleviation if it was to receive international support.
Then in September 2001 the IMF declared Zimbabwe ineligible to use funds under its poverty reduction and growth facility. On June 13, 2002 the executive board of the IMF adopted a declaration of non-cooperation with Zimbabwe and suspended technical assistance to the country. A year later the executive board suspended the voting and related rights of Zimbabwe in the IMF. Last December a further ban started a process which could ultimately result in the compulsory withdrawal of the country from the IMF.
During this process, Zimbabwe will have ample time to improve its relations with the IMF to reverse the economic slide and meet its overdue financial obligations.
On the other hand the European Union in 2000 announced an immediate freeze on bilateral high-level contacts. In 2002 it imposed targeted sanctions on Zanu PF politicians and officials considered to be Mugabe’s cronies. This has widened the gulf between Zimbabwe and the EU which last month extended the targeted sanctions and put additions to the list of those banned from travelling to Europe.
Zimbabwe has been excluded from the United States’ Africa Growth and Opportunity Act (Agoa), which seeks to put preferential terms on some African products entering the US. Zimbabwe is slowly being left out of the Nepad initiative in which African countries are committing themselves to the precepts of good governance as a way of promoting trade and investment from Europe.
All these international measures against Zimbabwe have coalesced into trade embargo that will take time and skill to unravel. But there are fears Gono’s efforts could be sabotaged by Mugabe’s government which is already in the election mode.
While Gono has been given the greenlight to talk to the Bretton Woods institutions and other donors analysts say the timing is most inauspicious. He needs a political gambit to take to the negotiating table.