KNIVES are out for Finance minister Patrick Chinamasa over his secretive arrears clearance strategy presented to three multilateral creditors in Lima, Peru, this week, as the country seeks long term funding to reverse the current economic meltdown.
Zimbabwe, in arrears since 1999, has come up with a strategy to clear the combined US$1,8 billion overdue obligations owed to the African Development Bank (AfDB), International Monetary Fund (IMF) and the World Bank, a move that will enable the country to access fresh funding from the three financial institutions.
The virtually broke country, currently battling with a US$10,8 billion debt (77% of GDP) debt has over the last two years agreed on IMF Staff Monitored Programme as a precursor for re-engagement with the international community.
The SMP — an informal agreement between a government and IMF staff to monitor implementation of its economic reforms — gave the government a thumbs-up on its targets set under the programme. Sources close to latest developments in Lima said Chinamasa and Reserve Bank of Zimbabwe governor John Mangudya presented the strategy yesterday ahead of the World Bank annual meetings which officially start today.
They said the strategy included “sensitive” issues suggesting Treasury’s headache to contain public sector spending, transparency in the diamond mining sector and the controversial indigenisation policy.
The strategy, the sources added, was anchored on the recovery agenda announced in President Robert Mugabe’s threadbare 10-Point Plan, which among other issues calls for labour reforms and strategies to unlock foreign direct investment inflows. Before the Lima meetings, Mangudya had been on a mission to European capitals to engage the Paris Club soliciting support from their governments and briefing them on the country’s debt strategy.
However, hardliners in Zanu PF are opposing the Chinamasa’s debt strategy saying the proposed raft of reforms which include measures to reduce the public sector wage bill could backfire for President Robert Mugabe and the ruling party in the next elections.
Zanu PF insiders say reducing public spending to 40% from 80% would be a big blow to Mugabe’s cronyism and patronage system, which political analysts say has been central to his 35-year rule.
Anti-reformists, who include Mugabe, War Veterans minister Chris Mutsvangwa and Mugabe’s nephew Patrick Zhuwao, recently appointed Indigenisation and Empowerment minister, among others, view structural reform programmes backed by the multilateral lenders with scepticism.
They claim that the institutions are catalyst for steering Third World economies to perpetual debt traps, citing past failures in Zambia and Zimbabwe in the 1990s.
Zhuwao recently made an acerbic attacks on the IMF telling them to “go to hell” showing clear hostility to multilateral lending institutions typical of his uncle. Faced with an underperforming economy, Mugabe in 1991 was forced to approach the IMF and the Economic Structural Adjustment Programme was initiated to reform and open the economy before he abandoned it.
Mugabe who was also in New York last week for the United Nations General Assembly also criticised the Bretton Woods institutions for their perceived rigidity, calling for an immediate overhaul.
“To support the implementation of the post-2015 Development Agenda, we call for expeditious reform of the Bretton Woods institutions, particularly their governance structures,” Mugabe said last week.
“It’s high time we addressed the democratic deficit in these institutions and improve their legitimacy. These reforms must reflect current realities and ensure the full voice and participation of developing countries in their decision-making and norm-setting.”
Zanu PF hardliners also view multilateral creditors as neo-liberal institutions which is in sharp contrast to what moderates and reformists think.
“Chinamasa has angered many of his colleagues in cabinet, who feel that he is going overboard to please the IMF and World Bank when we all know that there is no way the two institutions will provide new funding that will help revive the economy when President Mugabe and Zanu PF are still in power,” a senior Zanu PF official said this week.
“Instead they want to see the economy crumble and believe me that is what they are trying to do and Chinamasa is being gullible. That money is never going to come for as long as President Mugabe is power. So many of us feel that why not use the money we are using to repay arrears to fund projects that will help resuscitate the economy.”
But a devastating economic implosion that has seen companies closing down and workers retrenched on a massive scale due to lack of affordable long term capital has prompted Chinamasa to turn to the IMF and the World Bank. On Independence Day, Mugabe left Chinamasa with egg on his face when he reversed a decision by the minister to scrap annual bonuses for the civil service citing limited fiscal space.
The reformist wing, which now includes Vice-President Emmerson Mnangagwa, the likes of Tourism minister Walter Mzembi and Chinamasa, however contends that full re-engagement with the IMF and the international community is the only way out.
“Whether the economy is performing or not, we should always aim to have the correct percentage of wages to revenue. If you don’t, then that is unsustainable,” Chinamasa said.
“We should be able to bring the percentage of wages to the proper level which is 40%. It is rationalising our expences by making savings. What should be done in the civil service is (infuse) efficiency—it is good for the economy.” However, Zhuwao this week told the Zimbabwe Independent:
“I will not buy into the IMF and World Bank ideas which seek to remove the facilitatory role of government.”