Zimbabwe- the way forward

Aid programmes still continued but under a humanitarian label channelled through NGOs. But much more significant was the withdrawal of international finance and credit lines. This had a devastating impact and, even if not directed by official sanction policies, were their direct consequence. Despite the easing of diplomatic tensions in the post-Mugabe era, and the charm offensive that Mnangagwa has been engaging in from Davos to New York, the situation has not fundamentally changed.

Hawkins does point to the problem of ZDERA (the Zimbabwe Democracy and Economic Recovery Act of 2001, amended this year) in particular. This is the US law that prevents the US government supporting Zimbabwe at the IFIs, without implementing a set of political reforms. In the coming months, this will likely prevent the US rep at the IMF backing a recovery plan, making the position of others on the IMF board crucial if any changes to support Zimbabwe’s recovery are to be realised.

The new finance minister, Mthuli Ncube, knows all this, but does he have the leeway to change course? He is severely hampered by the political legacy of sanctions and other ‘restrictive measures’, and deep distrust across international actors. However, there have been some good signs. His interviews with Bloomberg and speeches around the world have mostly been impressive, and suggest that he is committed to a major economic restructuring.

Some of this will be tough, and will be highly political. A test of the new government’s commitment will be how far he is allowed to go. Already attempts at introducing taxation measures have resulted in protests. What happens when he is forced to cull the public sector, massively reducing the salary bill, or overhaul the currency system, which benefits those dealing on the black market, including powerful individuals well connected to the political system?

Clearly the stop-gap measure of a “multi-currency” environment that followed the abandonment of the Zimbabwe dollar and the adoption of the US dollar is no longer working. Local ‘bond notes’ were supposed to be backed by external hard currency finance, but are clearly no longer, and are fast losing value. Stalling the massive flow of hard currency out of Zimbabwe is vital, and this means ending the pretence of equivalence between greenbacks and bond notes. Sticking to the US dollar in a period when US protectionism is boosting its value is risky too, as it makes everything absurdly expensive. But setting up a new currency in such straitened times is not wise either, given the low levels of confidence in the economy.

What to do? Given the dire experiences of structural adjustment from 1991 – which in many ways set the scene for much of Zimbabwe’s current malaise – making the case for IMF stabilisation intervention, combined with a HIPC-style debt relief package, with all the raft of expected conditionalities does seem rash. But there really doesn’t seem to be any other option currently. The Chinese are fed up with Zimbabwe given its failure to pay back loans in the past, and the ‘socialist solidarity’ line has worn thin. Reluctantly, this may be the only route.

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