Zimbabwe is wasting its time talking to the International Monetary Fund which has promised to unlock the doors for funding if Harare clears its arrears with the Bretton Woods institution because the United States can veto any loans from international financial institutions to Zimbabwe if it wants to.
Although the United States has, for more than a decade, insisted that its sanctions on Zimbabwe are not targeted at the country but at designated individuals, the Zimbabwe Democracy and Economic Recovery Act, clearly states that Zimbabwe cannot get any loans or debt cancellation from the international financial institutions unless the United States president approves.
“Until the President (of the United States) makes the certification described in subsection (d), and except as may be required to meet basic human needs or for good governance, the Secretary of the Treasury shall instruct the United States executive director to each international financial institution to oppose and vote against—
- “(1) any extension by the respective institution of any loan, credit, or guarantee to the Government of Zimbabwe; or
- “(2) any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any international financial institution,” ZDERA says.
Subsection D of the Act says the US president may only issue the certification if:
- “the rule of law is restored in Zimbabwe, including the including respect for ownership and title to property, freedom of speech and association, and an end to the lawlessness, violence, and intimidation sponsored, condoned, or tolerated by the Government of Zimbabwe, the ruling party, and their supporters or entities;
- “Zimbabwe has held a presidential election that is widely accepted as free and fair by independent international monitors, and the president- elect is free to assume the duties of the office;
- “in the event the certification is made before the presidential election takes place, the Government of Zimbabwe has sufficiently improved the pre-election environment to a degree consistent with accepted international standards for security and freedom of movement and association;
- “the Government of Zimbabwe has demonstrated a commitment to an equitable, legal, and transparent land reform program consistent with agreements reached at the International Donors’ Conference on Land Reform and Resettlement in Zimbabwe held in Harare, Zimbabwe, in September1998;
- “the Government of Zimbabwe is making a good faith effort to fulfill the terms of the Lusaka, Zambia, agreement on ending the war in the Democratic Republic of Congo; and
- “the Zimbabwean Armed Forces, the National Police of Zimbabwe, and other state security forces are responsible to and serve the elected civilian government.”
The act identifies international financial institutions as:
- the International Monetary Fund,
- the International Bank for Reconstruction and Development (World Bank),
- the International Development Association,
- the International Finance Corporation,
- the Inter-American Development Bank,
- the Asian Development Bank,
- the Inter-American Investment Corporation,
- the African Development Bank,
- the African Development Fund,
- the European Bank for Reconstruction and Development, and
- the Multilateral Investment Guaranty Agency.
The United States, however, insists that its sanctions are targeted at 113 individuals and 70 entities and it is a myth that the United States maintains an embargo on Zimbabwe.
It says the targeted sanctions are enforced by the Treasury’s Office of Foreign Assets Control and not by ZDERA, a law enacted by the United States in 2001. Targeted sanctions came into force on 7 March 2003.
The US says it is a myth that “the United States is preventing Zimbabwe’s access to international financial assistance”.
The fact is that, it says: “The Zimbabwe Democracy and Economy Recovery Act (ZDERA) restricts the United States to vote in support of new assistance to Zimbabwe from international financial institutions (IFI’s), except for programs that meet basic human needs or promote democracy. It is important to understand, however, that Zimbabwe became ineligible for multilateral loans in 1999, well before ZDERA because it stopped repaying loans already owed to the IFIs.”
Zimbabwe owes the IMF $124 million and the World Bank about $1 billion and has been in arrears since 1999. The IMF says that it cannot extend any loans to a country that is in arrears unless terms to settle the arrears are agreed.
Zimbabwe has reportedly been paying a token $150 000 a month to settle the arrears and has been under an IMF staff-monitored programme since June 2013.
IMF representative Domenico Fanizza, who was at one time an IMF representative to Zimbabwe, told a parliamentary committee in March that the IMF “could consider” financial support for Zimbabwe if there was an agreement to repay its arrears.
Legal experts, however, say the IMF and other international financial institutions can only give loans to Zimbabwe if the United States agrees.
A United States journalist who is also a lawyer confirmed that ZDERA indeed allowed the United States to bar any loans to Zimbabwe unless the funds were for basic human needs.
Zimbabwean legal expert, Alex Magaisa, who was advisor to former Prime Minister Morgan Tsvangirai said that the notion that Zimbabwe must first pay its arrears to become eligible for IMF loans was diluted by the existence of ZDERA, which essentially gave power to the US to veto any loans or credit to Zimbabwe.
“ZDERA states that the US government shall direct its executive director at each of the international financial institutions (IFIs) to oppose and vote against any loan, credit or guarantee to the Government of Zimbabwe or any decision to cancel or reduce any debt owed by Zimbabwe to the US or any IFI. This is the case unless the US President rules otherwise and it is necessary to “meet basic human needs or for good governance”, which presumably covers necessary support in humanitarian situations.
“The effect of ZDERA is that unless the US Government says otherwise, the US directors at the various IFIs will have to veto any loans to Zimbabwe. Since the US voting power at the different IFIs is quite substantial, it can effectively block any loans to Zimbabwe. The net effect is that even if Zimbabwe meets it arrears, it is no guarantee that it will get loans from these IFIs,” Magaisa said.
Most decisions by the IMF and the World Bank require an approval rate of 85 percent of the vote. The United States alone holds more than 15 percent of the vote in the bank and the IMF which means it can effectively veto any decision it does not approve.
United States President Barack Obama extended sanctions on Zimbabwe or targeted individuals in March for another year because its human rights record has not improved.
But according to the Committee for the Abolition of Third World Debt, the United States does not need to overtly use its veto.
It quotes Catherine Gwin as saying that in most cases, decisions are often worked out between the United States and Bank management before they ever get to the board, or among members of the board before they get to a vote. And most board decisions are taken by consensus.
“It is the weight of its voice, therefore, more than the exercise of its vote that gives the United States effective power on the board,” she says.
An IMF team is due in Zimbabwe in two weeks for a second review of the staff-monitored programme.
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