HomeLocalFinanciers Won’t Loosen Purse Strings for GNU

Financiers Won’t Loosen Purse Strings for GNU

ZIMBABWE’S all-inclusive government will not receive financial aid from multilateral lenders anytime soon, but can stagger through the economic recession by using bilateral development assistance funds, analysts have said.

The country has since Independence in 1980 received financial aid from multilateral institutions such as the African Development Bank (AfDB), the World Bank and International Monetary Fund (IMF), but has since March 2007 failed to service arrears of close to US$500 million owed to the Bretton Woods institutions.

Analysts contend that this could be a major impediment to economic recovery for the inclusive-government that is seeking regional and international stimulus packages to wade through the 10-year economic meltdown.
Currently reeling from stock arrears estimated at US$4 billion and an urgent need to finance a US$1 billion budget, the government faces a Herculean task to bankroll government expenditure.
Despite the critical need for financial and technical aid, analysts suggested that government should conform to guidelines set out in the September 15 power-sharing pact if it wishes to restore its creditworthiness.
According to the World Bank, Zimbabwe’s gross domestic product has shrunk by one third in the past eight years and this could worsen unless immediate measures are taken.
“There is a zero chance of receiving funds from multilateral organisations such as the World Bank, IMF and the ADB,” said University of Zimbabwe political science professor Eldred Masunungure. “In the short-term, I don’t anticipate any measures until positive changes that depart from the previous regime are seen.”
Reported cases of farm invasions targeting white commercial farmers, press freedom and plurality, among other issues, according to Masunungure, would determine Zimbabwe’s re-engagement with the multilateral financiers. Masunungure however predicted that countries previously seen as hostile to President Robert Mugabe’s administration could “follow” a precedent set by the Australian government in extending aid to Zimbabwe.
Last week the Australian government boosted humanitarian aid by about US$10 million.
“At a bilateral level we see more countries going the Australian way. Scandinavian countries, Far East countries, France and Italy could do the same because they are less politically constrained,” Masunungure said.
World Bank assistance to Zimbabwe totalled US$1,6 billion between 1980 and 2000 when the country went into arrears.
As of March 2007, arrears to the World Bank amounted to US$484,8 million and to the IMF, US$103,3 million.
According to the World Bank, resumption of financial support would hinge on clearance of arrears and government commitment to a sound economic recovery programme.
Yesterday government launched the Short Term Emergency Recovery Programme which, among other things, seeks to restore social protection and safety nets that had been rendered meaningless by the comatose economy.
The United States, Masunungure said, could “soften” its stance after the expiry of recently extended economic sanctions by President Barack Obama.
The US shift would assist in restoring Zimbabwe’s battered image, Masunungure added.
Another University of Zimbabwe political science professor and critic of Mugabe, John Makumbe, was sceptical that Harare could receive a lifeline soon.
He said farm invasions around the country and the reappointment of Reserve Bank governor Gideon Gono could see financiers declining to bankroll the unity government.
“I think the chances of receiving sound financial aid are slim because few changes have been seen from the inclusive government,” Makumbe said. “The major problem is where to put the money and how to disburse it. The Reserve Bank is not a reliable custodian of financial resources. They can’t deposit it at the Ministry of Finance either because it is not a bank. They might put the money in a neighbouring country – Botswana or South Africa for example. The Reserve Bank has demonstrated how corrupt it is in the past 10 years.”
He said the major problem was that the country still had the old modus operandi in place.
“Farms are still being invaded and a lot of political prisoners are still behind bars. We are in a Catch 22 situation,” Makumbe said. “You cannot have these changes without money flowing in. On the other hand multilateral agencies underestimate the damages that have been caused by the Mugabe regime. You can’t have a head of state calling for farm invasions.”
He however said some financiers could agree to provide funds that cover a six-12 month period with “certain benchmarks” relating to governance and the rule of law.
Turning to the impact of the global economic recession on Zimbabwe’s chances of receiving financial aid, Makumbe said: “I still believe that there is enough money to bail Zimbabwe out. Money required by Zimbabwe is not as much as that given to AIG by the US government.”
Gono was this week quoted in the Sunday Mail saying it is premature to rely on financial aid from multilateral institutions given the country’s outstanding debts.
“In the case of Zimbabwe, it is important to note that we would need to do a lot in terms of fully repaying what we owe the IMF, the World Bank and the African Development Bank,” Gono said.
His remarks came at a time when the IMF was carrying out its routine Article IV Consultation mission with government.
“We would also need to closely restore good financial relations with the Paris Club of lenders and all other donors and financiers whom we owe money,” Gono said. “Quite clearly, these procedural matters, as well as the need for demonstrable track record for consistent and comprehensive macroeconomic policies, should be pivotal ingredients in shaping our collective expectations matrix on the current consultations and the expected outcomes.”
Zimbabwe, Gono added, should “be very careful not to inadvertently or overzealously inflate misinformed expectations, as this may needlessly damage the current positive mood for a better Zimbabwe.”
According to the central bank chief, the country’s “stock of arrears” stands at about US$4 billion with US$1,1 billion owed to multilateral institutions like the IMF, World Bank and the ADB.
The country owes the Paris Club US$1,1 billion and about US$69 million to non-Paris Club members.
Loss making parastatals under the long-term debt and suppliers’ credit owe about US$1,1 billion.
Government, according to Gono, has “recent obligations for importing grain that amount to around US$220 million”.
University of Zimbabwe Graduate School of Management professor, Tony Hawkins, could not be drawn into predicting the likelihood of receiving financial aid from the Bretton Woods institutions.
“It’s impossible to predict what could be done by the IMF in assisting Zimbabwe,” Hawkins said. “The IMF will produce its own suggestion to government and it will be up to government to adopt it or not (following the Article IV consultations). The IMF would be interested in knowing government’s pattern of spending, finance allocation to health and defence and the tax structure.”


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