WHILE the cash-strapped government urgently needs a rescue package through the Lima debt and arrears clearance strategy to salvage the fast-declining economy, doing so without political and economic reforms will not help much.
Zimbabwe Independent Comment
Zimbabwe is frantically making efforts to clear US$1,8 billion in arrears owed to three preferred international financial institutions—World Bank, International Monetary Fund (IMF) and the African Development Bank. Some reforms have been made in the process, but the changes have been piecemeal and fail to address structural issues. If successful this plan could trigger the release of US$2 billion in funding, a good thing.
However, it must be understood even if Zimbabwe gets the money, its problems won’t go away. You can’t fix the current morass by throwing money at it.
For Zimbabwe’s crisis is far more complex than it looks. The facts are clear. Zimbabwe’s economic problems are multi-faced and getting worse. Economic activity is severely constrained by tight liquidity conditions resulting from limited external inflows and lower commodity prices on global markets.
The IMF says unless the country adopts bold reforms, the economic difficulties will continue deepening in medium-term. Given the outlook of the global economy, realistic growth — not government’s daydreaming projections — is forecast to remain below levels needed to ensure sustainable recovery and poverty reduction.
The multilateral lender has also stressed the importance of stepping up structural reforms to boost recovery, growth and living standards. This will also help to secure Zimbabwe’s development partners’ support. Many have also raised the need to overhaul or repeal the indigenisation policy to create a business-friendly environment and resolve outstanding land issues swiftly. Other measures needed include improving the overall investment climate, tackling corruption, and promoting economic diversification.
While money will help the situation, that alone is not enough. Unless the country bites the bullet of political, economic and institutional reform, the crisis will continue.
Some soul-searching is needed here. Key reforms require political will from President Robert Mugabe’s regime. So far government is failing to tackle the need to reduce the size of the wage bill to re-orient spending towards priority capital and social outlays; improve debt management, develop a comprehensive public financial management strategy, and ensure tax reforms and key processes in revenue administration.
There is also reluctance to improve the business environment, including through a transparent and consistent application of their indigenisation policy and a new comprehensive land audit programme.
While securing funding is important to help recovery, without dealing with fundamental macro-economic, governance, rule of law, property rights, corruption and human rights issues the otherwise good though politically naïve debt clearance and new funding strategy will ultimately fail, if it’s not already dead in the water.