ZIMBABWE is reeling from a $10,7 billion external debt that has worsened the country’s risk.
The huge debt overhang has been an albatross around the government’s neck.
To tackle the debt issue, Zimbabwe has agreed to implement the International Monetary Fund (IMF) Staff Monitored Programme. But critics argue that such programmes often come at a great cost.
NewsDay Acting Business Editor Bernard Mpofu (ND) this week speaks to Finance Minister Tendai Biti on the programme and the politics around it.
Listen to the podcast below:
ND: What does the International Monetary Fund Staff Monitored Programme mean to Zimbabwe? TB: An SMP does not mean the takeover of the government or Ministry of Finance by the IMF.
It doesn’t mean that a country is surrendering its sovereignty to Washington. All it means is that because people gave you their money, and you failed to pay, so you yourself you caused the mischief. If you pay your money nobody bothers you. In our case we went to the IMF, first to restore our voting rights which had been taken away in 2006.
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Why were they taken away? We defaulted even on regular subscriptions; we had also invented voodoo economics.
On February 19, 2010, I fought and those voting rights were restored. But to have full restoration of normal relations with the international community, in particular the international financial structure that the IMF and the World Bank are the gatekeepers.
ND: Would you have subscribed to this programme if you were not in government TB: When I became Finance minister, I came from the left. I regarded the IMF as neo-liberal.
I then asked my friends from the left to give me data and literature that would enable me to avoid the IMF. What I got was tonnes and tonnes of documents that were long on critiquing the IMF, but short on offering alternatives. If there were, they were very few like repudiate debt. But how does a very small country like ours repudiate arduous debt — something that is in post-Berlin war world is not possible.
I had my own fears — my fears were that — first, won’t the IMF impose certain conditionalities on us? Second, won’t the Fund (IMF) make us implement anti-poor policies to the detriment of our people?
ND: What then changed? TB: Because I had studied this programme thoroughly, I could write a thesis on these things. I said look, let us have our own home-brewed strategy. After Highly Indebted Poor Countries was closed in 2004, it became clear that whatever I was dealing with was a post HIPC programme. So I didn’t have to deal with the labels associated with HIPC, which is why we painstakingly crafted ZAADS, so that it becomes the Bible of our engagements with the fund and donors. The bottom line is that we have to resolve Zimbabwe’s $10,7 billion debt question because debt is a huge sanction on Zimbabwe.
We can’t borrow from the International finance institutions whom at the present moment are awash with cheap money both at grant level and low interest loans. The African Development Bank, the World Bank group family. We also can’t borrow from international financial institutions which are also awash with money, they don’t even know what to do with.
When they find someone to give that money they are selling it at 2% and that is going to be the case until Ben Bernanke (US Federal Reserve chairman) increases the rates. Personally I don’t think that will happen very shortly.
ND: Can you point out any of regional peers that have tapped in into these cheap pools of funds in recent times? TB: To show that the world is awash with money, I will give you two examples — Rwanda and Zambia. In Zambia, they floated a bond, they wanted $400 million, but they had offers of $11 billion. They ended up taking $700 million. Rwanda, despite its own problems with the false allegations being made against it, that it supports rebels in the region, despite all that, they recently went to the international market seeking $400 million and they got $4 billion offers.
Now Zimbabwe can’t even raise $30 million of Treasury Bills because of the risk component. Zimbabwe defaulted in the past and there is no guarantee that it can repay now.
The chlorinator or the cleaning instrument that ensures we can be trusted again is the IMF which you then enter into this SMP.
ND: Why has it taken so long to re-engage the IMF? TB: The reason why it took them so long before they could come — governor Gono said was diplomacy because you have to negotiate over and over again.
You are negotiating here and the chaos faction doesn’t like this programme then you are negotiating with the fund that we are worth to be put on this test.
ND: How did you become eligible for the SMP? TB: The initial thing was that they looked at what we had done in the last four-and-half years and they said hang on a minute . . . there is an emerging narrative that is rising here. They looked at our micro and macro-economic management of the economy. Between 2009 and 2011, we were the fastest growing economy in the world. They also looked at the budget deficit and how we managed it.
ND: Does the politics of the day affect the SMP? TB: Absolutely, if we have an unsustainable election outcome, forget about it. The IMF agreed to a programme with Sudan, but it has been going on for years and years — over 15 years because of bad politics that is why you saw us in Maputo fighting that. We need a credible, legitimate election in Zimbabwe. We cannot continue to be arrested by predatory politics and vicious cycles of exclusion underwritten by the chaos faction of Zanu PF. It cannot happen. So we need to destroy this huge temple where the chaos faction of Zanu PF are bishops — this church needs to go.
ND: There has been talks of setting a BRICS bank to finance emerging markets? As Finance minister would you in future consider borrowing from such an institution? TB: South Africa is a very powerful country, but in my respectful opinion, it is an African country first before it is anything. I think that efforts should be directed towards setting a regional bank that will complement the African Development Bank (AfDB) and efforts must be made to strengthen further the AfDB.
I think if there are challenges within the AfDB let’s address them and under Donald Kaberuka it is a shining bank so let’s strengthen it. I think that proliferation of financial institutions does not necessarily result in correct financial intermediation, so personally I think that let’s have a regional infrastructure bank that works with AfDB and World Bank.
ND: In applying for this SMP, the government has undertaken several reforms such as ensuring accountability of diamond revenue. Can this be done given that Parliament may soon expire? TB: I see no reason why we shouldn’t comply. I have no problem that we will be able to comply with the things that we said we would comply with.
The problem that we have is this confusion around the election. The sooner we have a legitimate and credible election the better because we can’t continue with this insanity.
