AFRICAN Development Bank (AfDB) president Akinwumi Adesina has flagged political governance reforms as the elephant in the living room in Zimbabwe’s quest to normalise relations with international financial institutions and the world community.
BERNARD MPOFU
Desperate to end nearly two decades of isolation, Zimbabwe adopted a debt resolution and arrears clearance plan which is underpinned by an overhaul of the economic and political environment.
But critics doubt Zimbabwe’s political will in addressing longstanding political issues such as reforming the electoral environment, ensuring that citizens enjoy civil liberties such as freedom of assembly and uphold the rule of law despite making pronouncements to break with the past.
Adesina, who was appointed by President Emmerson Mnangagwa as leader of the debt and arrears resolution drive, told delegates this week that the southern African nation is currently hamstrung by its huge debt overhang. The AfDB chief was in the country this week attending a High Level Debt Resolution Forum.
He said economic sanctions are driving Zimbabwe further into unsustainable debt. The debt itself, Adesina added, is not as debilitating as the arrears on the debt since the country cannot access international concessional financing or other revenue or less expensive financing to pay down its debt obligations.
Of the US$5.7 billion of bilateral debt, 69% of this is accounted for by arrears. Similarly, of the US$2.6 billion of multilateral debt, 91% is accounted for by arrears.
“Arrears is now the new debt of Zimbabwe. The past is hurting the present and the future of Zimbabwe,” Adesina said.
He said while Zimbabwe has taken strides in adopting neo-liberal economic policies, contentious yesteryear issues such as the compensation of white commercial farmers who lost tracts of land during agrarian reform stood in the way of the ongoing debt negotiations.
The government has taken the decision to eliminate multiple exchange rates, introduce an enhanced foreign exchange auction market, transfer outstanding debt of the Reserve Bank of Zimbabwe to Treasury for greater transparency and avoid off-budget financing; and end the quasi-fiscal activities of the Reserve Bank of Zimbabwe.
Treasury has also taken decisions to end subsidies and reform state-owned enterprises.
Also, the establishment of the liquidity management committee is a proactive measure that will promote effective coordination between fiscal and monetary policies has been seen as liberal. Experts also say the decision to embark on an International Monetary Fund Staff-Monitored Programme (SMP) is critical in reassuring creditors, development partners, and multilateral and bilateral financial institutions, and will also ensure that the reforms committed to are implemented.
“There is very strong and measurable commitment by the government to economic and fiscal policy reforms,” he said.
“The most difficult and more sensitive reforms are the governance reforms… As I mentioned during the second high-level dialogue and in my discussions with H.E. President Mnangagwa, development partners and other creditors, it is important that we find a mechanism to try to fast-track and front-load the payment of these compensations. Hope delayed makes the heart go weary. Further delays in paying the compensations could erode trust and confidence. So, timing counts; responsiveness counts; and financial sustainability counts. We need a greater sense of urgency on this issue.”
Adesina said the African Development Bank is currently working with the government of Zimbabwe to develop innovative financial instruments and structures that can be used to front-load the mobilisation of the US$3.5 billion compensation to dispossessed farmers.
Three years ago, Zimbabwe agreed to pay US$3.5 billion in compensation to white farmers whose land was expropriated by the government to resettle black families, moving a step closer to resolving one of the most divisive policies of long-time leader Robert Mugabe’s era.
But the debt-ridden country has been struggling to raise sufficient funds required to compensate the evicted farmers.
At the time the agreement was signed, Treasury hoped that half of the amount would have been paid by mid-2021. According to the compensation agreement between farmers and the government, Zimbabwe, which is barely recovering from two years of economic contraction, does not have the money and will issue long-term bonds and jointly approach international donors with the farmers to raise funding.
“The government of Zimbabwe is clearly and genuinely very committed. It is committed to taking tough decisions to move this process forward,” Adesina said.
“And development partners and creditors are genuinely very committed and have been engaging very positively and proactively in these dialogues. We know what needs to be done. The challenge now is to do them, and do them quickly, and ensure that there are measurable indicators to assess the direction and pace of progress. We must move more rapidly now into speedy implementation on the ground. Let’s turn matrices into materiality. Let’s turn resolve into results.”
Commenting on the forthcoming elections, Adesina said Zimbabwe’s commitment to holding free and fair elections will also play a role in normalising relations with the family of nations.
“The people of Zimbabwe and the international community will be watching very closely. The full weight of re-engagement with the international community will depend on this. It will also depend not just on the election, but the entire electoral process that guarantees a credible election,” Adesina said.
“We need to ensure that there is concrete and measurable progress on the Zimbabwe Democracy and Economic Recovery Act (Zidera), which is critical for re-engagement with the United States. We must do all to fully fulfill all the conditions under Zidera so that verifiable progress made can be used to support advocacy for the lifting of the sanctions imposed by the US Congress under Zidera. From the visit of President Chissano and I to the US last week to meet with leaders in the US Congress, Treasury Department, State Department, and other US agencies, it was very clear that there is support for this high-level dialogue, and hope that it will translate into concrete and measurable progress on the ground to inform a consideration of the lifting of the sanctions under Zidera.”
