ZIDERA is not just a potential but an actual spanner in the works, because it stipulates that the US representative at the IMF and World Bank must vote against lending to Zimbabwe.
Assuming this hurdle can be overcome, the process will take months to complete, meaning that Zimbabwe is unlikely to see any new money from the Bretton Woods institutions until 2019.
Over the past year, the government, state media and some businesspeople and donors have sold re-engagement to Zimbabweans as a one-way street.
In this narrative, donors, lenders and investors cannot wait to spend and lend in Zimbabwe resulting in remarkable growth of 13% annually in per capita incomes to propel the country into upper middle-income status by 2030.
Economists point out that for this target to be reached, the country with virtually no domestic savings, would need to invest at least 50% of GDP each year – more than China in its growth heyday. In a country where consumption spending exceeds GDP, this is a tall order.
Such rose-tinted scenarios bear no resemblance to the reality. At present, Zimbabwe is investing 15% of GDP, two-thirds of bank lending is to the government sector, much of it to subside loss-making parastatals, a bloated public service, food prices, agricultural production (so-called command agriculture) and exports.
Formal sector employment has stagnated for a quarter of a century. The capital stock is both depleted and obsolete; less than 10% of the workforce has a formal sector job while two-thirds of the population live below the poverty line.
Re-engagement will be far less growth-friendly than officials and ministers believe. It will involve a sharp cutback in government spending, laying off thousands of people from the public sector, privatising parastatals, (more redundancies), a steep devaluation of the currency – perhaps as much as 50% – higher interest rates and increased taxation.
In the early 1990s, Zimbabwe implemented a structural adjustment programme that was very unpopular and failed to achieve its aims, largely because the government which had agreed to it, balked at its implementation.
Almost 30 years later, the economic and social climate is far worse than it was then, meaning that the reform medicine will be even more unpalatable. No-one – in the ruling party or the opposition – told the electorate what re-engagement would mean. No politician was prepared to admit that without pain there would be no gain.
The government and the media have created expectations that will not be met, meaning that whatever the outcome of the 2018 polls, their effect has been, yet again, to kick the economic can down the road while deepening the country’s reliance on outsiders, the diaspora, foreign lenders, investors and donors.
Zimbabweans are about to learn that there is no sentiment in economics and that foreigners, struggling to improve living standards in their own countries, are in no mood to finance the profligacy of the Zimbabwe government.
By Anthony Hawkins for The Source