Repeated rebuffs by international finance institutions of Finance minister Mthuli Ncube’s plea for a rescue package have highlighted the government’s failure to implement comprehensive economic and political reforms despite endless promises by President Emmerson Mnangagwa to turn a new leaf.
In response to Ncube’s frantic letter pleading for assistance, Paris Club chairperson Odile Renaud Basso spelt out conditions for the country to normalise relations with the group of major creditor countries.
“Paris Club members take note of Zimbabwe’s prolonged humanitarian crisis and the worrisome economic and financial situation of the country. They acknowledge these difficulties are exacerbated by the impact of Covid-19 pandemic. They welcome the partial progress made by Zimbabwean authorities in implementing economic reforms in some areas in 2019, in particular on fiscal consolidation,” Basso said in his missive to Ncube.
“Paris Club members insist, however on the fact that the Government of Zimbabwe’s desire to normalise its relations with the international community can only advance following the implementation of substantive and sustainable political and economic reforms, in particular regarding the respect for human rights, especially freedoms of assembly and expression.”
Basso added that the government’s successful implementation of the International Monetary Fund’s Staff-Monitored Programme (SMP) would be a crucial first step as would be political reforms.
The SMP, an informal arrangement between the government and the IMF to monitor the implementation of key economic programmes in the country and set for the period May 15, 2019 to March 15, 2020, is in limbo after the government failed to meet the agreed targets due to unrestrained fiscal expenditure and massive growth in money supply after the authorities prematurely brought back the Zimbabwean dollar despite the shaky economic fundamentals. The government’s failure to meet the targets has not gone down well with the Washington-based multilateral financier and other lenders. It has emerged as a key indicator of Harare’s reluctance to reform.
A successful SMP would have rekindled the country’s hope of getting funding it desperately needs to turn around the ailing economy characterised by a debilitating liquidity crunch, foreign currency and fuel shortages, as well as runaway inflation which has galloped to nearly 800%.
“The government that came into office following the 2018 elections adopted an agenda focussed on macro-economic stabilisation and reforms. This was supported by a Staff-Monitored Programme from the IMF, adopted in May 2019, but is now off track as policy implementation is mixed,” the Bretton Woods institution noted.
The IMF noted that the uneven implementation of reforms, notably delays and missteps in monetary reforms, has failed to restore confidence in the Zimdollar.
The Bretton Woods institution pointed out that the glacial pace of the re-engagement process and a lack of modalities for debt repayment “continues to constrain Zimbabwe’s access to official external support”.
The lack of reforms has been a major impediment to the government’s efforts to get a bailout package — even from its “all-weather friend China”.
This is in stark contrast to the undertaking by Mnangagwa who promised substantive reforms when he came into power on the back of a military coup in 2017.
The stance taken by the Paris Club in demanding reforms is not surprising, says economist John Robertson.
“No, it is not a surprise. I do not see why they should change their stance because the reforms have not happened,” Robertson said. “When you sit in a wheelchair when everyone knows you can get up and run, you will not get support. Everyone knows we are not crippled. We are being treated badly because we are behaving badly and that is how it should be.”
Relations between the Paris Club and the country are unlikely to improve after the government’s decision to suspend trading on the Zimbabwe Stock Exchange. This has caused panic and uncertainty among investors. The suspension is seen as a major assault on property rights and could sound the death knell for the country’s ability to attract foreign investment, which dwindled from US$771 million in 2018 to US$259 million last year, according to figures availed by the Reserve Bank of Zimbabwe.
The unfavourable response to Ncube’s distress call reflects the disenchantment in Western capitals over the country’s failure to reform, says business consultant Simon Kayereka.
“The response to Ncube points to lack of confidence in the country’s governance system. Government has shown reluctance in embarking on both political and economic reforms,” Kayereka said. “We have seen the dilly-dallying on the currency issue and knee-jerk reactions such as suspending the stock exchange. We need to be serious if we are entertaining any hopes of external support. As long as issues are not resolved, no one will come to our aid.”
There is a need to implement political and economic reforms if the country is to get the much-needed assistance, says economist Prosper Chitambara.
“We need to strengthen our political and economic institutions. The failure to implement reforms is undermining economic growth,” Chitambara said. “We need to walk the talk in terms of reforms, especially on the issue of property rights.”
Mnangagwa’s administration has not fared any better when it comes to political reforms. Government has clamped down on demonstrations despite the right to demonstrate being enshrined in the constitution with arrests and beatings of protestors. Pictures of truncheon-wielding policemen chasing after nurses who are on strike for better working conditions this week have gone viral, providing evidence of the lack of political reforms.
The abduction of opposition party members, civil society activists and even comedians has only further cemented the argument that the government is not walking the talk when it comes to reforms. Mnangagwa is yet to bring to book soldiers responsible for the death of citizens during protests over the delay in the announcement of general election results on August 1 2018 as recommended by a commission he appointed which was led by former South African president Kgalema Motlanthe. Government’s reform deficit has been met with widespread criticism globally.