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‘Zim faces deeper economic crisis’

CHATHAM House, a leading independent think-tank close to the British establishment, says it is vital to strike a balance between re-engagement and reform in Zimbabwe as President Robert Mugabe’s regime faces its worst economic nightmare since 2008 compounded by a huge debt overhang.

Bernard Mpofu

Zimbabwe is currently saddled with a US$10,8 billion debt that has almost paralysed both public and private sector as revenue continues to decline on the back of massive company closures.

According to a report compiled by the think-tank, Zimbabwe is faced with its most serious economic crisis since 2008 characterised by a “triple whammy”’ of deflation, stagnation and low productivity which is exacerbated by low commodity prices and weak regional currencies.

“The gravity of the economic situation has forced the Zimbabwean government into a process of re-engagement with the West. Re-engagement is primarily aimed at attracting new revenue to ease the crisis of liquidity and fiscal deficit,” Chatham House said in a report titled The Domestic and External Implications of Zimbabwe’s Economic Reform and Re-engagement Agenda.

“Although the EU (European Union) and Australia have reviewed their Zimbabwe strategies, including responding to Harare’s re-engagement strategy by revising and in some cases easing their sanctions, the United States and Canada have lagged behind with out-dated sanctions lists. At a time when the US administration is reviewing its strategy towards Sudan and its head of state, Omar al-Bashir, US policymakers should do so too with regard to Zimbabwe.

“International and regional governmental engagement does not guarantee the success of long-term reform, but continued isolation will almost certainly lead to the failure of reforms to take hold. A nuanced process of exerting political pressure balanced with the offer of support will reinforce the technocratic assistance provided by the IFIs [international financial institutions], and will be fundamental to ensuring the effective use of any prospective concessional financing.”

Government’s much-hyped debt arrears clearance strategy, the Lima Plan, which seeks to settle US$1,8 billion arrears to preferred IFIs to allow Zimbabwe to access US$2 billion in new funding, has come under threat — with some lobbyists already pronouncing it dead in the water — as the authorities fight a fierce lobby against it.

The British government supports the Lima Plan.

This comes as the Institute of Security Studies (ISS) in its latest report on Zimbabwe said the country’s reform agenda could be seen as pretence or an attempt to hoodwink multilateral lenders to extend debt to the cash-strapped economy.

Experts say Zimbabwe’s recovery is dependent on financial and economic reforms that are expected to rebuild the confidence necessary to attract investment and improve options to access new lines of credit.

“Political support has been partial, inconsistent and largely tepid, underscoring a dawning reality that the imperatives of retaining Zanu PF hegemony, the inevitability of Mugabe leaving office and the related factionalism around succession fundamentally stifle prospects for reform and, by extension, narrow options for engagement,” the ISS said in a report titled Zimbabwe’s Reforms — An Exercise in Credibility or Pretence.

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