Reserve Bank of Zimbabwe governor John Mangudya told the Zimbabwe Independent this week that the settling of arrears owed to the World Bank and the African Development Bank (AfDB) was dependent on whether the country can first adopt a raft of confidence-building reforms.
The central bank chief said structural reforms were now the elephant in the room; the sooner they are addressed, the better for Zimbabwe’s prospects of coming out of the woods.
This is the surest way of ending nearly two decades of international financial isolation and giving the devastated economy a fighting chance. Foreign direct inflows have been reduced to a trickle, while all the neighbouring countries are enjoying the lion’s share.
Despite announcing that Zimbabwe had secured funding to clear the US$1,4 billion arrears to the World Bank and US$600 million owed to the AfDB, the central bank chief said more needs to be done to ensure that the country meets the prerequisites of settling the arrears.
Mangudya’s remarks bring to the fore the lethargic approach that has epitomised the government on issues of national interest.
The prevarication on vitally important national issues is not only deplorable, but also highlights the need for a people-centric government with a well-defined and achievable prosperity agenda. Energies are being expended on political plots and counter plots as the race hots up to succeed President Robert Mugabe who has been in office since 1980, while running down the economy spectacularly. Zimbabwe adopted its debt and arrears clearance plan in Lima, Peru, in October 2015.
The debt-ridden country promised to settle arrears with creditors who enjoy preferred status within a year. Notwithstanding the failure to disclose the salient features of the source of funding, the Independent has consistently and credibly reported on this issue. Today, two years after Lima, the government has nothing much to show except financial sector reforms and the clearance of IMF arrears using the country’s stock of Special Drawing Rights has been done. Zimbabwe remains in limbo.
The economic situation is untenable. Currently, the government wage bill gobbles up more than 90% of total revenue. Chinamasa’s bid to reduce the wage bill announced in his mid-term fiscal policy review statement last September was blocked by Cabinet. Government is also expected to strengthen financial sector stability and confidence as well as accelerate the ease of doing business reforms and reduce the cost of doing business under the Rapid Results Approach to enhance investor confidence. Overhauling state-owned enterprises and parastatals is also critical for Zimbabwe’s re-engagement process. With elections now on the horizon, the silly season is upon us and the economy will be sacrificed on the altar of populism.
The message that Zimbabwe requires several reforms which will result in the expunging of the World Bank and AfDB arrears, in synchrony with the arrears settlement, is beginning to sound like a broken record. This government has to take seriously issues that will haunt generations if not tackled urgently. As matters stand, Mugabe wants to tighten his grip on power and, typically, he will view with suspicion any call to embrace far-reaching reforms.