Zimbabwe has intensified it’s re-engagement with the international community, with the immediate objective of resolving the arrears issue with international financial institutions (IFIs) eventually seeking debt rescheduling under the umbrella of the Paris Club.
Ritesh Anand Column
On the sidelines of the recent International Monetary Fund (IMF) annual meeting in Lima, Peru, Finance minister Patrick Chinamasa presented a strategy for clearing its external debt thereby seeking the support of creditors and development partners. Strong support from the Lima meeting, successful completion of the SMP and continued commitment by the authorities would set the stage for advancing the re-engagement process with the IFIs and bilateral creditors and herald a new beginning for Zimbabwe. There is no doubt, however, that support from the international community will come with conditions attached.
Some in government that oppose the re-engagement process have been critical of the proposed fiscal and economic reforms. Can Zimbabwe realise its goals without the support of the international community? Can we achieve growth without the necessary economic and investment reforms? Can we rely solely on diaspora inflows for investment and growth or do we need to attract foreign direct investment (FDI)?
Some of you will recall the IMF-led structural adjustment programmes of the early 1990s. Governments of all political persuasions were pressured into compliance with drastic structural adjustment measures.
Zimbabwe abandoned its measured growth with equity strategy in 1991 in favour of the notorious Economic Structural Adjustment Programme (Esap), known in Zimbabwe, aptly, as the “Economic Suffering for African Peoples”. We have experienced the consequences of this disastrous period, both economically and politically.
Is Zimbabwe ready for austerity measures that are likely to come with financial support from the international community? What impact will these austerity measures have on growth?
While the need for fiscal discipline is blatantly obvious, especially the government wage bill (which accounts for more than 80% of the budget), Zimbabwe needs to promote growth and development. What if structural adjustment (aka austerity) in Zimbabwe is replaced by a more balanced debt restructuring, encouraging investment alongside reform while protecting basic services and the vulnerable? Is it possible to achieve twin targets of growth and structural reforms?
Structural adjustment programmes (Saps) are economic policies for developing countries that have been promoted by the World Bank and IMF since the early 1980s through the provision of loans on condition of the adoption of Saps. Structural adjustment loans is funding made available by the World Bank for the purpose of supporting Saps. They are designed to encourage the structural adjustment of an economy by, for example, removing “excess” government controls and promoting market competition as part of the neo-liberal agenda followed by the bank.
The Enhanced Structural Adjustment Facility is an IMF financing mechanism to support macro-economic policies and Saps in low-income countries through loans or low interest subsidies.
Zimbabwe, as well as many countries in Africa, have suffered the long-term consequences of a combination of structural under-development, oligarchic corruption, patrimonialism and poor economic governance. Finding a way out of the bind without succumbing to more pain and suffering will be tough, requiring new ideas and new allies.
Escaping debilitating debt while promoting both growth and social justice is nevertheless possible. Today across Africa, new perspectives are on the table, and not just the tired, old, failed medicines from the IMF and others. Most notably, new ideas — and finance — are coming from China, Brazil, India, Malaysia and South Korea, among others.
A new state-led developmentalism is gaining traction across the world. In Rwanda or Ethiopia, a new African formulation of a developmental state is being forged. They all draw insights and experience from the emerging nations, most notably China. There is increased financing available from the Brics (Brazil, Russia, India, China and South Africa) with the Asian Infrastructure and Investment Bank and the Chinese or Brazilian state investment banks playing a more significant role.
Balancing these investments, offsetting risks and avoiding unsustainable debt will be a tricky balancing act for Zimbabwe in the coming years as commodity-led growth tails off. Zimbabwe relies on the mining sector to drive growth with mineral exports accounting for over 50% of total exports and 15% of GDP.
Zimbabwe needs to continue to re-engage with the international community, it desperately needs to push economic and investment reforms to attract much-needed FDI. We cannot rely on the diaspora to drive investment and growth. The country cannot achieve growth targets without the necessary reforms and support of the international community. In time, the benefits that Zimbabwe will accrue from the re-engagement process will undoubtedly silence the disparagers of this indispensable decision.
As President Robert Mugabe heads to New Delhi, India, this week for the 3rd Annual India-Africa Summit 2015, we hope that he will carry a message of hope and optimism for a more integrated Zimbabwe.