REMARKS this week by Domenico Fanizza, a former IMF representative in Zimbabwe currently leading the fund’s delegation to Harare to assess progress on the Staff-Monitored Programme (SMP), that the country must pay up first before it can access more funding show international financiers mean serious business.
Zimbabwe Independent Editorial
Zimbabwe has been borrowing for years without adequately paying back due to protracted economic problems. When funders began to refuse to give it more and demand their repayments, President Robert Mugabe and his senior officials, instead of owning up, started playing hide and seek claiming they were being punished for their unstructured and chaotic land reform programme.
Even though the IMF and other lenders stopped giving Harare money due to non-payment way before the targeted restrictive measures were imposed on Mugabe, his family and cronies, state entities and Zanu PF-linked companies in 2002, government officials sought to obfuscate issues, via ludicrous sanctions rhetoric.
Zimbabwe owes the IMF and World Bank US$124 million and US$1 billion, respectively. Its total debt overhang is around US$10 billion.
Addressing the parliamentary committee on finance and economic development on Wednesday, Fanizza said the IMF could consider financial help if there is an agreement in repaying the arrears.
“We could consider financial support when there is an agreement on how to repay the arrears. We cannot extend a loan to a country in arrears,” said Fanizza.
Cabinet approved, on October 29 2014, a proposed Debt Resolution Strategy for re-engagement with creditors over external indebtedness. In line with the international financial architecture, the key conduits of the re-engagement process are Bretton Woods institutions, namely the IMF, World Bank and the African Development Bank (AfDB) which was in Zimbabwe last week.
The main elements of government’s strategy include removal of sanctions, continuing to co-operate with the key international financial institutions, sustaining token payments to the IMF, AfDB, the World Bank and the European Investment Bank, and completing the SMP — an important stepping stone towards normalising relations with the international community.
The country has to strengthen its external position, as a pre-requisite for arrears clearance, resume debt service and restore access to external financing.
The main picture is that Zimbabwe’s economy is at a crossroads and Mugabe and his incompetent government are groping in the dark. Yet this is not the time for more hand-wringing, but serious thinking and bold action. Mugabe and his cronies are always talking about the past. When they try to tackle current problems, they sound out of their depth and sometimes just comical due to economic illiteracy.
The debt burden is the biggest albatross around Zimbabwe’s neck. It stands in the way of the country’s economic recovery and long-term development. Its resolution requires a mindset shift, serious leadership and political will to reform policy, while improving governance and creating a friendly business environment.