UNDP had plan for Zimbabwe

The United Nations Development Programme and the World Bank unveiled their Comprehensive Economic Recovery in Zimbabwe document two weeks after the signing of the Global Political Agreement.

The document was said to have been produced after more than one year of research.

It highlighted the following:

• Macroeconomic stabilisation: The researchers underscored the need  to remove price and exchange rate controls as well as capital controls on individuals, and to establish and publish money supply targets to rein in inflation. Post-stabilisation, the researchers underscored the need to carry out a public expenditure review, establish and publish fiscal rules, conduct budgetary reviews, strengthen public financial management, and establish inflation targeting.
•  
• Financial sector recovery: The researchers identified the lack of financial intermediation by commercial banks and the role now being played by the central bank, as an impediment to growth. Therefore, there was need to restore the central bank to its core mandate and constitutionally guarantee its autonomy. In order to achieve pro-poor growth there was also a need to increase access to finance for the poor by removing constraints on the operations of micro-finance institutions.
•  
• Private sector development: The researchers highlighted that private sector development was being stifled by lack of foreign currency to import raw materials, out-migration of skilled workers, massive disinvestment, and diminishing competitiveness due to hyperinflation and an overvalued exchange rate. Therefore, it was suggested that attention be given to easing foreign currency constraints, improving the regulatory environment, rehabilitating and rebuilding productive infrastructure, workforce training, public  private partnerships, and formulating a strategy for the private sector to participate in the global market place. It was noted that special attention should be given to the mining sector (which contributed 4 percent of GDP and 45 percent of exports) and to the tourism industry. The researchers also stressed the need to restructure and reform public enterprises, which had poor pricing policies and conflicting policy goals.
•  
• Agricultural reform: Reform of governmental institutions was noted as a short-term priority as well as the need to announce pre-planting prices. The research team placed land tenure reform in the communal areas as a medium to long-term need that would not be achievable until approximately 2015.
•  
• Labour and human capital development: The researchers emphasised the need for civil service reform, vocational education, and programs that would facilitate the return of skilled professionals.

Full cable:

Viewing cable 08HARARE907, ZIMBABWE DONOR DIALOGUE – PLANNING FOR RE-ENGAGEMENT,

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VZCZCXYZ0005

RR RUEHWEB

DE RUEHSB #0907/01 2811137

ZNR UUUUU ZZH

R 071137Z OCT 08 ZDK

FM AMEMBASSY HARARE

TO RUEHC/SECSTATE WASHDC 3540

INFO RUEHSA/AMEMBASSY PRETORIA 5554

UNCLAS HARARE 000907

SIPDIS

AIDAC

FFP/W for JBORNS, ASINK, LPETERSEN

AFR for JHARMON, ELOKEN, LDOBBINS, KALMQUIST, FMOORE

PRETORIA FOR HHALE, JWESSEL, PDISKIN, SMCNIVEN

E.O. 12958: N/A

TAGS: EAID EAGR PREL PHUM ZI

SUBJECT: ZIMBABWE DONOR DIALOGUE – PLANNING FOR RE-ENGAGEMENT,

STABILIZATION, AND RECOVERY

REF: HARARE 894

——-

SUMMARY

——-

¶1. A number of donor meetings have taken place in the last two

weeks to plan for re-engagement, stabilization, and recovery in

Zimbabwe when political conditions permit. On September 25, heads

of assistance agencies met to discuss and come to agreement on a

range of issues, including: the nature of a recovery program;

practical application of the common set of principles and benchmarks

drafted to determine when and to what extent it is appropriate to

implement expanded assistance; issues of coordination; and bilateral

programmatic interests and funding expectations. A report of the

discussion and key agreements will be discussed at the high-level

donor meeting in Ottawa on October 30. On September 26, Morgan

Tsvangirai and members of his technical transition team and the

Government Strategic Unit (GSU), which has been established as an

advisory and operational arm of the Office of the Prime Minister

(OPM), met with the Policy Committee of the World Bank Multi-Donor

Trust Fund (MDTF). Tsvangirai called the meeting to convey to

donors the immediate priorities that will be taken up by the OPM and

the Council of Ministers once a political agreement is reached, and

to discuss issues of GOZ/donor coordination, as well as

international plans for providing economic recovery assistance. On

October 1, the UNDP and the World Bank revived the Imba Matombo

Consultative Forum, which is intended to facilitate convergence of

multiple stakeholders on analysis, constraints, and policy options

facing Zimbabwe. At the half-day seminar, UNDP presented the

“Comprehensive Economic Recovery in Zimbabwe – A Discussion

Document,” which lays forth a long-term economic recovery and

development program. A summary of each of these three meetings is

provided below. END SUMMARY.

——————————————— ——

DONOR RE-ENGAGEMENT: GETTING ON THE SAME SONG SHEET

——————————————— ——

¶2. Harare-based heads of assistance agencies met on September 25,

regrouping after the summer holidays and assessing appropriate

responses to political events in Harare. The meeting also sought to

follow up on the last donor conference in Stockholm and plan for the

upcoming high-level donor meeting in Ottawa (now scheduled for

October 30). In addition, the all-day meeting provided an

opportunity to clarify and consolidate thinking on what

re-engagement with the Government of Zimbabwe (GOZ) will require

should the recently signed power-sharing agreement bear fruit. It

was agreed that the outcome of the meeting should be a presentation

for the Ottawa Donors’ Conference.

¶3. The UK’s representative for the Department for International

Development (DFID) presented an outline of a recovery plan which put

forward three scenarios. The first was optimal – fully funded and

fast-tracked with full cooperation and buy-in from the GOZ. The

second envisioned a slight lag in funding and more negotiation with

the GOZ on reform, and the third was premised on partial reforms.

The Mission will forward via e-mail the entire analysis. While the

first scenario was shown to have the quickest impact and best

recovery potential, the price tag of USD 300 million in balance of

payments support is ambitious, as is the projected overall

assistance requirement estimate of USD 5.1 billion over 5 years.

This scenario depicts key stabilization actions taking place during

the first 12 months with balance of payments support, technical

assistance, and support for demobilization which would parallel GOZ

steps to reengage the international financial institutions, stand up

functioning ministries, develop an approach to deal with arrears,

and demobilize militias. Clearly all of this depends upon the

outcome of current negotiations, political will, and the ability of

progressive forces to bring along the rest of the GOZ. The second

scenario would be slower and socially more costly; donor response

would also be slower. The third could very well lose any impact

during implementation and donors would likely limit their support to

humanitarian assistance.

¶4. Participants also discussed the sequencing of arrears clearance,

possible involvement of regional actors such as the African

Development Bank and South Africa in the process, steps toward HIPC

(Heavily Indebted Poor Country initiative) status, the need for

parallel efforts in key development sectors, and financing. Donors

voiced concerns about the need for confidence building steps on the

part of the GOZ prior to any major investment and harkened back to

the donor principles agreed in previous donor meetings. Managing

expectations was seen as critical as was coping with the reality

that while all parties may want to be in scenario 1, the more

realistic likelihood would be scenario 2.

¶5. The donors reaffirmed their commitment to the common principles

and the need for a performance-based response. However, they also

agreed that it would not be a neat process. All agreed that a clear

commitment by the GOZ to put in place a number of immediate measures

to build confidence and create the conditions for a just and

transparent recovery process would be met with a process of donor

re-engagement and program development consistent with the Paris

Declaration on aid effectiveness. The confidence-building measures

include a sound and credible program of economic stabilization in a

context of peace and security. Although little can be done until

there is a credible government in place, donor representatives

agreed that one of the first steps would be to engage the government

to set clear benchmarks. The ensuing process would combine helping

the GOZ to meet the benchmarks and a clear response to achieving

them. Donors emphasized the need for clear and consistent

communication during this process as well as the development of a

communications strategy. The group also proposed development of a

transitional results matrix to enable joint monitoring of progress

to ensure mutual accountability.

¶6. Immediate steps required for re-engagement were seen as: the

complete re-opening of humanitarian space and assessment of needs; a

firm commitment to the impartial distribution of humanitarian aid

based on need; the immediate commencement of dialogue with regional

and international financial institutions and major creditors, with a

view to putting in place an internationally-approved economic

stabilization process and an agreed course of action to tackle the

country’s arrears; an immediate end to political violence and

intimidation, including the standing down and cessation of

activities by militia groups and the release of all political

prisoners; and, actions that will quickly establish the conditions

for an open and accountable process of national reconciliation,

including the lifting of all constraints on the media and an end to

the harassment of civil society and human rights groups. Early

tests of intent include: a credible political settlement, a credible

Minister of Finance and Governor of the Reserve Bank, a credible

budget, and a credible commitment to an internationally-supported

stabilization package engaging the International Monetary Fund,

World Bank, and African Development Bank.

¶7. The final point of discussion was how to structure the

“architecture” for donor coordination as we move forward. All

participants are signatories to the Paris Declaration on Aid

Effectiveness which calls for coordination around a single, national

plan for recovery and the establishment of lead donor arrangements.

It was agreed that while we are committed to that direction, the way

forward will not be entirely clear until we are engaged with the

GOZ. In summary, there is emerging clarity on how to go forward and

continued consolidation around the donor principles. There is a

coherence of view and agreement that open and frank dialogue is

needed to ensure solidarity of action. DFID was tasked with

consolidating the results of the discussions to present at the

upcoming donor meeting in Ottawa.

———————————————

TSVANGIRAI MEETS WITH HEADS OF DONOR AGENCIES

———————————————

¶8. On September 26, Morgan Tsvangirai and members of his technical

transition team and Government Strategic Unit, which has been

established as an advisory and operational arm of the Office of the

Prime Minister (OPM), met with the Policy Committee of the World

Bank Multi-Donor Trust Fund (MDTF). The meeting was called by

Tsvangirai to convey to donors the immediate priorities that will be

taken up by the OPM and the Council of Ministers once a political

agreement is reached and to discuss issues of GOZ/donor

coordination, as well as international plans for providing economic

recovery assistance.

¶9. Tsvangirai reiterated that his top priorities were to address

the food crisis, stabilize the economy, and strengthen rule of law

(with media reform, human rights, and governance sector reform at

the top of the list). In particular, Tsvangirai requested

assistance from donors to address the humanitarian situation, to

provide policy guidance with regard to macro-economic stabilization

(e.g., advice as to whether a currency board is appropriate, when to

lift price controls, etc.), to develop the 2009 national budget

(which needs to be submitted to Parliament by the first week of

December), to reform tax administration, to provide for the needs of

people who will be adversely affected by an economic recovery

program, and to take stock of local level needs, including

rehabilitation of water infrastructure.

¶10. Tsvangirai asked donors for a notional idea of forthcoming

assistance. Donors responded that it was premature to discuss this

information until an agreement is reached and benchmarks are met.

The donor group presented the initial benchmarks that would need to

be achieved before recovery assistance could be provided, including

unimpeded humanitarian access, freedom of the press, disarming of

militias, freeing of political prisoners, and the announcement of an

electoral roadmap. Donors noted, however, that they were in the

process of increasing their humanitarian assistance to respond to

the food crisis and non-food emergency needs. Tsvangirai took away

from the meeting a strong understanding that he needed to manage

public expectations about forthcoming international assistance and

how quickly it would come. He also took away a greater

understanding of the complexity, uniqueness, and time constraints of

donor processes to approve assistance budgets and move money.

¶11. Donors used the meeting to make a number of key points. They

urged Tsvangirai and his team to complete the 100 day plan as a

matter of priority. It would serve as a document against which to

contemplate assistance once conditions are right and to more fully

understand the priorities of government. Furthermore, donors urged

Tsvangirai to take a proactive lead with regard to donor

coordination and to establish an office to oversee this

responsibility. In addition, donors emphasized that once an

agreement is reached coordination would need to begin with the whole

of government, including ZANU-PF elements, versus only the MDC.

Tsvangirai responded positively to each of these requests, noting

that the 100 day plan is one of his immediate priorities and that he

intended to appoint a team to interface with donors until the

Ministry of Finance could be strengthened to take on this role.

¶12. At the conclusion of the meeting, all parties spoke of the

usefulness of the discussion and the need to continue dialogue.

Tsvangirai closed the meeting by reiterating his main takeaway

points: 1) that he needed to get government in place and initiate

reforms before donors could engage in recovery dialogue; 2) that he

needed to complete his 100 day plan immediately, and that individual

ministries needed to develop their own 100 day plans as soon as

possible to assist donor planning efforts; 3) that he needed to

lower public expectations regarding the immediacy with which

international assistance would be forthcoming; and 4) that he needed

to work toward expanding donor dialogue to include relevant ZANU-PF

individuals.

——————————————–

UNDP PRESENTS ITS LONG-TERM DEVELOPMENT PLAN

——————————————–

¶13. On October 1, the UNDP and the World Bank revived the Imba

Matombo Consultative Forum, which is intended to facilitate

convergence of multiple stakeholders on analysis, constraints, and

policy options facing Zimbabwe. At the half-day seminar, UNDP

presented the “Comprehensive Economic Recovery in Zimbabwe – A

Discussion Document,” which is the culmination of more than a year

of research. The document summarizes the current situation and

outlines necessary actions to spur economic recovery in the areas of

macro-economic stabilization, financial sector recovery, private

sector development, agricultural reform, and labor and human capital

development. The research was facilitated by Dr. Mark Simpson, a

UNDP consultant; Zimbabwean sectoral experts took the lead to draft

the discussion document and define points of intervention. The

forum, which was co-chaired by Dr. Agostinho Zacarias (UNDP Res Rep)

and Dr. Mungai Lenneiye (Acting World Bank Country Manager), drew

participants from the diplomatic corps, bilateral and multilateral

donor agencies, the private sector, and the MDC.

¶14. The content of the document mirrors the points of sectoral

intervention that have been discussed in other venues, including the

MDTF and like-minded donor group. The recovery program outlined is

intended to provide a long-term development plan whereas the World

Bank’s “Zimbabwe Economic Recovery Program” (ZERP) outlines an

immediate emergency plan of action. The World Bank plans to

implement the ZERP through a programmatic MDTF and the MDC has

provided input into the MDTF process. It is anticipated that in

time UNDP will request funding to pursue the programs highlighted in

its report.

¶15. Highlights of the discussion include:

–Macroeconomic stabilization: The researchers underscored the need

to remove price and exchange rate controls as well as capital

controls on individuals, and to establish and publish money supply

targets to reign in inflation. Post-stabilization, the researchers

underscored the need to carry out a public expenditure review,

establish and publish fiscal rules, conduct budgetary reviews,

strengthen public financial management, and establish inflation

targeting.

–Financial sector recovery: The researchers identified the lack of

financial intermediation by commercial banks and the role now being

played by the central bank, as an impediment to growth. Therefore,

there is need to restore the central bank to its core mandate and

constitutionally guarantee its autonomy. In order to achieve

pro-poor growth there is also a need to increase access to finance

for the poor by removing constraints on the operations of

micro-finance institutions.

–Private sector development: The researchers highlighted that

private sector development is being stifled by lack of foreign

currency to import raw materials, out-migration of skilled workers,

massive disinvestment, and diminishing competitiveness due to

hyperinflation and an overvalued exchange rate. Therefore, it was

suggested that attention be given to easing foreign currency

constraints, improving the regulatory environment, rehabilitating

and rebuilding productive infrastructure, workforce training, public

private partnerships, and formulating a strategy for the private

sector to participate in the global market place. It was noted that

special attention should be given to the mining sector (which

contributes 4 percent of GDP and 45 percent of exports) and to the

tourism industry. The researchers also stressed the need to

restructure and reform public enterprises, which have poor pricing

policies and conflicting policy goals.

–Agricultural reform: Reform of governmental institutions was

noted as a short-term priority as well as the need to announce

pre-planting prices. The research team placed land tenure reform in

the communal areas as a medium to long-term need that would not be

achievable until approximately 2015.

–Labor and human capital development: The researchers emphasized

the need for civil service reform, vocational education, and

programs that would facilitate the return of skilled professionals.

DHANANI

(62 VIEWS)