Zimbabwe’s arrears clearance plan on shaky ground

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Zimbabwe’s re-engagement efforts with the international community, multilateral and bilateral creditors has been thrown off-balance after the European Union (EU) and the United States (US) scuttled the southern African nation plans to position for fresh funding to stimulate economic growth.

Government is making frantic efforts to clear the $1,8 billion in arrears to the World Bank and African Development Bank, a development widely seen as a major step for Zimbabwe to start accessing foreign credit, especially for the private sector as well as foreign direct investment.

The country’s arrears clearance plan which was adopted in Lima, Peru in 2015 had been back on course after Britain threw its weight behind its former colony.

Britain’s commitment signalled the restoration of diplomatic relations between Harare and London, which had reached rock bottom after the latter accused the former of electoral fraud in past elections, poor human rights record and failure to uphold property rights during the land reform programme which saw former commercial white farmers losing vast tracts of land to locals.

Diplomatic sources told Business Times that post-election violence which rocked Harare, claiming the lives of six people unsettled creditors and investors alike who questioned Zimbabwe’s commitment in upholding basic human rights and seeing through any economic reforms. Security forces clashed with MDC Alliance supporters on August 1 after the opposition claimed electoral fraud on the July 30 polls.

Mnangagwa has since commissioned an inquiry into the post-election violence whose findings are expected to be out by this December.

While the EU expressed concerned over the shootings, Finance minister Mthuli Ncube who is currently in Bali, Indonesia, now faces a herculean task to convince the world that Zimbabwe is ready to break away from yesteryear human rights violations.

The sources also expressed concern over the half-hearted measures announced by Government, in particular, the increase in intermediated money transfer tax, without a coherent strategy to arrest the ballooned expenditure.

Ncube on Wednesday addressed a roundtable of creditors including the International Monetary Fund, African Development Bank and the Paris Group of creditors which was represented by the EU and other bilateral partners such as the United States, Australia, Netherlands and South Africa where he committed to several reforms.
It is understood that shortly after the meeting, Ncube met the US deputy assistant secretary of Treasury Erick Meyer where the world’s largest economy flagged the need for Zimbabwe to embark on far-reaching reforms.

“During the meetings Meyer made it clear that the United States was ready to assist Zimbabwe for as long she takes Zidera proposed reforms as key to re-engagement,” a government official privy to the meetings said.

Yesterday, the EU said the just ended elections felt short of international standards, a statement that immediately brought the country’s electoral administration under the spotlight.

Mark Stevens, EU Election Observer Mission deputy chief election observer yesterday presented a final report of the July polls in which he submitted 23 recommendations that need to be addressed by 2023 elections to have credible elections.

“The elections fall short of international standards because of the post-election period violence on August 1. But prior to the incident the campaign and electoral environment was peaceful ,” Stevens said.

“The tragic deaths of protesters on August 1, as a result of excessive use of force by security forces and the subsequent abuses of human and political rights of members of the opposition further marred the perception of the electoral context.”

In August, United States President Donald Trump signed into law the Zimbabwe Democracy and Economic Recovery Amendment Act (Zidera). The Bill was passed by the United States Congress in July and sets tough conditions for Zimbabwe to re-engage with the United States of America.

The Zidera Act means that Zimbabwe’s economy is unlikely going to get financial support from creditors (such as the World Bank and IMF) where the US government until it embarks on a raft of economic and political reforms.Before these ongoing meetings, the US Senate had lobbied against lending funds to developing countries that received infrastructure loans from China at usurious rates. Zimbabwe requires a $2 billion stimulus package to arrest an economic implosion.

According to the IMF, the US is the largest shareholder of the 189-member financier, controlling 16,52 percent, closely followed by Japan (6,15 percent) and France and United Kingdom (4,03 percent apiece). Zimbabwe, which has been in arrears since 1999 has a 0,17 percent stake.

The US is also a member of the Paris Club where it has the power to veto any decisions. And Zimbabwe owes the most amount to the Paris Club of around $3.2 billion.

A few weeks ago outgoing British Ambassador to Zimbabwe, Catriona Laing said an International Monetary Fund (IMF) programme would help Zimbabwe expedite the clearance of its arrears.

“We are here to give that support to try and encourage a process back to an IMF program, perhaps through an interim staff monitoring programme as soon as possible,” Laing told a press briefing.

She said the SMP would enable Zimbabwe “to start a serious dialogue” around the clearance of the arrears.

“We will be tracking both pathways: the economic pathway and political pathway. We want Zimbabwe to succeed,” Laing said.

Recently the IMF said it was ready to assist Zimbabwe on its road to recovery once it reforms. Zimbabwe has been in arrears with the Bretton Woods institution since the turn of the millennium.

“The IMF stands ready to help (Zimbabwe) design a reform programme that can help facilitate clearance of external arrears to international development banks and bilateral official creditors . . . that would open the way for fresh financing from international community.

“Supporting reforms will require a comprehensive stabilisation and structural programme from the (Zimbabwe) authorities and financial support from the international community to provide space for these reforms.”