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Zim’s futile dance with IMF

Opinion & Analysis
IMF team leader to Zimbabwe, Wojciech Maliszewski said the country still remains outside the realm of those countries that can get access to financial aid (loans) from the institution.

ZIMBABWE’S chances of economic recovery before 2028 are slowly vanishing as multilateral institutions and multinational companies give tough conditions or are moving away to other markets. Current leadership is at sea in trying to address issues raised, despite the clarion call — Zimbabwe is open for business.

The International Monetary Fund (IMF) gave a gloomy picture about Zimbabwe’s economic recovery, prescribed a number of solutions and finally politely told the current regime, the international funder will not be extending any fresh loans to the troubled southern Africa country.

This verdict came after two weeks of extensive consultations by the IMF team on how Zimbabwe can have a Staff-Monitored Programme (SMP).

It is important to unpack what is the IMF and what is an SMP. The IMF has 190 member countries that work to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth and reduce poverty around the world.

Essentially, the IMF is a twin to the World Bank, both established post the Second World War.

These institutions play complementary roles: The IMF focusing on macroeconomic and financial stability, while the World Bank concentrating on long-term economic development and poverty reduction.

Let’s turn to SMP. This is a successor programme to Structural Adjustment Programmes which were intervention to failing economies.

Zimbabwe had one between 1990 and 1995, which was abandoned midway with thousands of workers jobless, many public functions privatised and State-owned enterprises sold into private hands and a classic example in Zimbabwe being Dairibord — the milk processor.

IMF team leader to Zimbabwe, Wojciech Maliszewski said the country still remains outside the realm of those countries that can get access to financial aid (loans) from the institution.

“However, the IMF is currently precluded from providing financial support to Zimbabwe due to its unsustainable debt situation — based on the IMF’s Debt Sustainability Analysis — and official external arrears,” Maliszewski said.

This closure of a door to new funding for Zimbabwe is not new. The African Development Bank (AfDB) too has closed the doors on Zimbabwe.

Just before the 2023 elections, President Emmerson Mnangagwa appointed former Mozambique President Joaquim Chisanno and AfDB president Akinwumi Adesina champions of the arrears’ clearance and debt resolution process.

The duo said Zimbabwe had to address issues of political and economic reforms as well as curtail corruption. These are the elephants in the living room.

These same recommendations came from the IMF team. It said: “Discussions covered policies to restore macroeconomic stability and improve growth prospects, focusing on addressing the sources of fiscal pressures including quasi-fiscal operations of the Reserve Bank of Zimbabwe (RBZ); liberalising the foreign exchange market and establishing an effective framework for exchange rate and monetary policies; and progressing on reforms to improve economic governance and reduce corruption vulnerabilities.”

Is Mnangagwa and his Cabinet ready to bite the bullet and implement the demanded reforms? To a great extent, the answer is an emphatic no!

Let us try to break this down into digestible chunks.

Stopping RBZ quasi-fiscal operations would in a single blot mean Mnangagwa’s flagship project of roads infrastructure will come to a screeching halt, dead in their tracks. The government cannot afford going out with a squib.

We move to liberalising the foreign exchange rate. Zimbabwe has a history of a sustained war against its local currency, particularly after 1997 when the land reform started.

Within a decade, Zimbabwe dollars had become worthless and left the regime with no option, but to dollarise.

Dollarising the economy meant RBZ could not do quasi-fiscal operations and production would decline as the country would find it difficult to export goods and services produced using hard currency.

It’s a long shot, but Mnangagwa would once again decline this.

What does reforms to improve economic governance and reduce corruption vulnerabilities mean?

It invariably means the following: Restructuring the civil service (job cuts), privatising parastatals, and more importantly, transparency in procurement of goods and services by public bodies.

This is a huge ask to Mnangagwa. This is the same man who has arbitrarily placed 21 parastatals under Mutapa Investment Fund.

Besides that, last week, he added another set of companies which are now exempt from following the Public Procurement and Disposal of Public Assets Act.

This is murky and I doubt Mnangagwa would want to change this and follow IMF prescriptions.

The IMF was categorical saying: “In this context, the mission encourages the authorities to ensure that the corporate governance arrangement, transparency and financial reporting and accountability oversight of the recently established Mutapa fund are in line with international standards and good practices.”

It is more than clear that Zimbabwe’s dalliance with the IMF is just to tick the proverbial boxes of re-engagement.

Zimbabwe is on its own in the short to medium term. No one is willing to touch Zimbabwe, it is a leper in the community of nations.

This brings us to the question of large multinationals which are moving from the Zimbabwean markets in a clear vote of no confidence in the investment-starved southern African nation.

Deloitte is the latest big company to move out. It joins the long list of Coca-Cola Central Africa, Lever Brothers, Barclays Bank, Standard Chartered and LaFarge that have moved out of the market and allowed local persons to invest.

Deloitte Zimbabwe managing partner Charity Mtwazi said: “With the exit of Deloitte in Zimbabwe, we will be ushered into a new phase. We are excited to continue our legacy of serving clients in Zimbabwe, but under a different brand. Importantly, the team responsible for service delivery remains the same, ensuring continuity and client trust.”

It remains to be seen how long it will last.

It is time Zimbabwe changes tact and do something radically different. Fight corruption in the public sector, change management style and above all incorporate good economic governance for posterity. Waiting for the IMF is like waiting for Godot.

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