Yes, the IMF, among other purported centres of excellence, has been there since 1945. The IMF was there when the catastrophic 2008 “train smash” was building up in global financial markets. Why did the IMF not sound the warning bells? Why did the conventional theoretical formulations and the “smart” econometric models fail to convincingly predict the global financial crisis?

Today, we see the same “experts” attempting to once again preoccupy global opinions through thumb-sucked “guestimates” of potential losses and the expected slow-down of the global economy due to the unprecedented global financial crisis which started in the United States of all places. The experts are conveniently electing to be silent about why the IMF and similar organisations, including the government of the United States, did not foresee or prevent the crisis.

To all these nagging questions, the answer is simply that the global economy has undergone fundamental structural shifts that have rendered the bulk of traditional micro and macroeconomic postulations outdated, sterile and irrelevant. It is for this reason that new perspectives should be crafted in order to confront the transformed dynamics of modern day economies.

The bulk of conventional theoretical postulations and predictions of absolute convergence of economies and financial markets must, therefore, be thoroughly put to test, modified and even discarded to save economic policies from becoming absolute trivialities conveniently used by people and nations with hidden agendas that have nothing to do with uplifting the livelihoods of humanity.

Thus whether an economy is large, medium or small, the fact remains that each has its unique initial conditions that influence the cause-effect synergies in that economy. Macroeconomic and financial policies must, therefore, be formulated in the context of those unique initial conditions of a given country. My conviction is unshakable on this life lesson.

In Zimbabwe for instance, the country perspired under the gruelling yoke of colonialism for close to one full century. Before attaining political independence in 1980, the country went through a bloody armed struggle, as the impoverished indigenous people resisted, and fought and won against the colonial forces.

In the context of the pre-independence era, the distribution of incomes and the tools of wealth creation were heavily skewed in favour of a white racial minority with British origins. The backdrop does set unique initial conditions that have defined the structure, vulnerabilities and receptivity of the Zimbabwean economy to given sets of macroeconomic police changes.

Over the period 1980-90, Zimbabwe spent the first decade of its independence primarily building internal cohesion and promoting racial healing after the gruelling liberation struggle for total emancipation.

The macroeconomic framework was, therefore, one that attached greater prominence towards the construction of broad-based social infrastructural imperatives particularly in the areas of health and education, as well as resuscitation of other dimensions of productive infrastructure, including roads, water systems, power generation, dam construction and railway expansion among many others.

Infrastructure-wise, Zimbabwe still stands with a hefty comparative advantage over many developing countries, including most within the region, thanks to the far-sighted developmental policies undertaken by the government in the 1980s.

The 1990s epoch saw Zimbabwe implementing in great depth the IMF-sponsored Economic Structural Adjustment Programme (ESAP) whose main tenets included the liberalisation of goods and factor input markets, and the deregulation of financial markets, among other measures.

Beginning in 2000, Zimbabwe’s inevitable land redistribution programme set in, marking the turning point in the economic history of the country in terms of what is happening to the economy today.

On the back of the land reform programme, Zimbabwe has received all-round condemnation, initially from former colonial master Britain, and later the generality of the Western World. As a result of this condemnation, Zimbabwe has endured a near decade of virtual isolation, with all the multilateral loans cut off, as well as explicit withdrawal of most donor-funded developmental programmes followed by the imposition of illegal sanctions. These covert and overt sanctions have had a devastating adverse demonstration effect on the generality of global commercial lenders who have been shunning Zimbabwe.

The country’s initial conditions of being a nascent, former colonial victim were thus further drifted into being a subject and target of well-calculated international sanctions. The world watched in a state of painful indifference, largely accentuated by the propaganda might of the powerful international media that demonised the country, and daily the scope and role of macroeconomic management faded and faded away. In these circumstances, no thinking central banker could simply stick to the niceties of conventional wisdom and expect a better or meaningful outcome for Zimbabwe.

Between 2000 and 2003, the joints of the economy’s limbs had literally been drained of the necessary lubrication for business, households and industry to thrive. The mines became increasingly unable to import critical equipment, machinery and other vital consumables as the illegal sanctions took their toll on foreign exchange availability. Medicines in hospitals started to dry up, as medical drugs and critical spare parts for delicate medical equipment also stopped coming into the country.

In agriculture, the combined effects of the drying commercial bank credit, following the inevitable timidity and inertia of private capital in periods of revolution, as was the case during the emotive stage of the land reform programme, as well as the recurrent droughts, implanted a stigma of food insecurity in the country.

For instance, the late 1990s had seen Zimbabwe’s commercial banks allocating at least 95 percent of their total loans to agriculture. By 2003, this had fallen sharply to around a mere 10 percent of total commercial loans, spelling a very precarious fate for agriculture as the mainstay of the economy. With this reality, conventions and orthodoxy simply could not do as they became luxuries that the country could not afford.

Capacity utilisation in factories by 2003 had also fallen to under 20 percent, and the same gloomy picture engulfed the other productive sectors of the economy, including mining, tourism, distribution and services. On the money and capital markets, Zimbabwe’s banking sector had been infested by the illicit bug of having banks stray out of their core mandate that effectively poisoned overall liquidity and solvency in the economy’s financial markets.

Under the sway of a casino ethic, banks had followed the scent of quick profits and had strayed into illiquid real estate investments, as well as taking imprudent exposures on the stock exchange, setting the scene for a “perfect financial storm” in 2004-05 which was exactly similar to what the United States and Europe were later to experience in the 2008 meltdown when their delayed turn eventually came.

In December 2003, I remember vividly, when I assumed the post of serving my country as central bank governor, spending sleepless nights pondering how to tackle what I saw clearly as a foregone conclusion that Zimbabwe had mutated into a very dangerous casino economy.

Under the illegal sanctions, most of the external long-term capital inflows had dried-up. The hard knuckles of recurrent drugs were wrecking havoc through threats of hunger in the countryside. Factories, mainly those that employed multitudes thanks to their labour intensive technologies, were tightening up their cost lines through job layoffs. This further put a genuine call on the RBZ to “please do something to help us cushion the blows from the casino environment”.

The real life imperatives got me thinking very deeply. I found myself at the crossroads of decision making. I had the choice of simply ignoring the harsh realities on the ground and sticking to the narrow, lifeless traditional role of central banking of just tinkering with interest rates and let things take care of themselves at the mercy of an irresponsible casino ethic that had taken root in the national economy against the backdrop of equally irresponsible and illegal sanctions that were affecting vulnerable groups the most; or I had to break the norm and delve into the all-exciting world of innovative pragmatism informed by a substantive consideration of the new and dangerous economic situation that had arisen in Zimbabwe.

According to the advice I received as a new governor of the Reserve Bank from the apparently revered and “must read” IMF Handbook: Financial Sector Assessment, “modern central bank laws limit central bank credit to government and do not permit the central bank to perform non-central banking functions… Extraneous powers and duties must be avoided…”

While there are still some vested interests in Zimbabwe who continue to view the IMF in God-like terms, and who treat its politicised prescriptions in biblical terms, the truth is that the IMF and its conventional approach are not only political but now belong to the past.

At the height of the 2008 global financial crisis, embattled British Prime Minister Gordon Brown told an audience of business leaders that the IMF “should be more like and independent central bank… than a political committee, which it is” (AFP, 27 October 2008).

Brown’s observation came at a time when it had become a gospel truth in Zimbabwe because of the country’s experience with the IMF’s increasingly political role that tends to make a bad situation worse under the cover of dogmatic and yet outdated economic prescriptions that have nothing to do with the reality on the ground.

After spending five years on the central banking job, I can confirm that on December 1, 2003, when I assumed office, I did not willingly and knowingly fall victim to manifestly poor advice from the IMF, advice which certainly they have not given to the central banks in Europe and the United States in the wake of the devastating 2008 global financial crisis.

I followed my mind and chose the pragmatic path when I took up my assignment.

I chose the flexible path where the realities on the ground shape and embolden the determination and convictions of policy makers to be responsive in their strategies.

I made a conscious decision that the new model of central banking that I was going to pursue, and pursue with all the passion I could invoke, was going to be one where conviction had to be the overriding factor over blind conformity with orthodoxy, even when practical realities on the ground dictated otherwise.

It is against this backdrop that in this book I take the reader into the insights of the centrifugal and centripetal dynamics that shaped my monetary policy frameworks between the period 2003 and 2008 of my tenure as Governor of Zimbabwe’s Reserve Bank.

As is now common cause, the path that my team and I chose to relentlessly pursue in 2003 was later in 2008 to become the “inevitable path of choice” as a response to the 2008 global economic meltdown even among hardened proponents of orthodoxy such as the central banks of the US, the UK and the EU in general, when in their own backyards the threats of a devastating recession in 2008 brought home the inevitable need for pragmatism, a concept based on the view that the wisdom of an approach is to be judged by its practical relevance on the ground and not by the presumed purity of its theoretical postulates.

I thus view 2008 as not only the year when profound realities came to light to the leading economies but also as the year when the approach taken by the RBZ in 2003 under my watch was vindicated when the whole world of central banking turned to quasi-fiscal operations in order to manage extraordinary circumstances in their backyards, something I in particular in Zimbabwe in general had been demonised for daring to do as a response to dire challenges in our own backyard witnessed in 2003.

(Zimbabwe’s Casino Economy: Extraordinary Measures for Extraordinary Challenges is published by ZPH Publishers Pvt Ltd. E-mail sales@zph.co.zw or call +2634497007 to order a copy)
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