RE-ENGAGEMENT talk has dominated the national economic discourse for a couple of years now. Finance and Economic Development Minister Patrick Chinamasa has made it his number one objective.
No doubt Zimbabwe has to re-engage with the West, with global capital in an effort to secure cheap funding and improve country risk. Government has upped its re-engagement drive by committing to pay $1.8 billion in arrears to Bretton Woods institutions.
The agreed plan will unlock long term credit that the country greatly requires.
Overall, there have been good exchange of pleasantries and good dialogues between the international finance institutions. Good advice has also been given with the International Monetary Fund monitoring through the Staff Monitored Programme, the World Bank showing unparalleled commitment Ease of Doing Business while the African Development Bank has assisted with funding.
All this is to be commended and surely a step in the right direction if Zimbabwe is to catch up with the rest of the region in terms of development. Commendable except that re-engagement will not be complete if sanctions against Zimbabwe remain. Last year, at an IMF dialogue with the Ministry of Finance and Reserve Bank of Zimbabwe, Minister of Foreign Affairs Simbarashe Mumbengegwi, towards the end of the discussions said that it was “odd” that nobody had raised the issue of sanctions up to that point!
Obedient to the superficiality on which the discussion had carried on, Minister Chinamasa deflected the issue of sanctions towards Zimbabwe’s own efforts in showing its creditworthiness by servicing its debts to multi-lateral lenders. The Finance Minister was not to be harshly criticised as his sentiments were of good intent, but they were misplaced.
It is true that Zimbabwe must focus considerable effort into becoming a creditworthy borrower who is able to service his debt on time. However, sanctions cannot be ignored. Sanctions elucidate the disparity in re-engagement agreement between Zimbabwe and its lenders. Zimbabwean stakeholders should not waste time tinkering on the periphery, cautiously diverting from the significance of sanctions. As we report elsewhere in this issue, Barclays Bank was fined nearly $2,5 million by the US Department of the Treasury’s Office of Foreign Assets Control (Ofac) to settle claims relating to the violation of US sanctions by processing transactions for government-backed entities in Zimbabwe.
Barclays Bank is accused of processing 159 transactions totalling around $3,4 million from July 2008 to September 2013 or through financial institutions in the US, including the company’s New York branch, for corporate customers of Barclays Bank of Zimbabwe, which were mainly IDC Zimbabwe companies. These actions by the US authorities show that no matter what efforts Zimbabwe puts on normalising relations with the international community, sanctions remain the elephant in the room.
As long as sanctions remain, we strongly believe that no significant funding will come to Zimbabwe from the international financial institutions.
We are aware that even if the International Monetary Fund and the World Bank are prepared to release funds to Zimbabwe, the US will veto that. Recently a United States Senate Committee Chair on Foreign Relations, Senator Bob Corker’s letter to the Obama administration implored the US to veto any attempts to advance funding to Zimbabwe.
Government is currently working on the ease of doing business, the cost of doing business and clarifying a host of policies which will attract foreign direct investment. The focus since last year and especially after the Lima IMF and WB meetings has been to attract FDI. The RBZ has also relaxed the threshold for foreign investors to buy stakes of up to 49 percent in companies listed on its stock exchange from 40 percent previously.
But despite all these measures we remain ostracised. Flowing of FDI to Zimbabwe remains a pipe dream.
Although we acknowledge that some positive outcomes have been achieved, notably the implementation of the IMF’s Staff Monitored Programme which is due for the third and final review this month, we are of the view that these initiatives might not result in funding given the machinations by some among the international community.
Instead, we must focus on developing internal capacity for economic development. This is why the element of internal resources mobilisation becomes key.
Let us tighten our revenue collection systems, plug illicit financial flows, curb corruption and improve transparency and accountability in mineral revenues.
Re-engagement must not be translated as capitulation on our part neither should it be read as an act of desperation. If the West is sincere, it must remove all sanctions unconditionally!