The International Monetary Fund (IMF) believes Zimbabwe’s short-term macro-economic prospects have brightened somewhat, but it warns that the long-term outlook remains grim in the absence of international support and the threat of growing infighting in the country’s new coalition government.
The report, exclusively obtained by the Mail & Guardian, followed the IMF’s first visit to Zimbabwe since the formation of the unity government.
It says the country needs $200-million in urgent budgetary support and $300-million for immediate humanitarian assistance in the form of food aid, health and education.
Caught between its inability to raise foreign budgetary support and the need to convince its restive workers to return to work on meagre $100 monthly allowances, the government faces the threat of civil unrest, says the IMF.
The fund says currency reforms have helped stabilise the economy, halting Zimbabwe’s world-record inflation and improving its short-term prospects. But “despite a brighter short-term macro-economic outlook, Zimbabwe will not be able to discharge its external debt service obligations in 2009”.
The IMF regards the most significant risks as:
- The emergence of more political disagreements among coalition partners, resulting in policy reversals. Further internal conflict was narrowly averted this week when police rearrested 18 opposition activists facing terrorism charges (see story below);
- Budget shortfalls forcing Zimbabwe to cut back on expenditure and triggering social unrest; and
- Bank failures, as institutions fail to adjust to the new currency system.
Unions are likely to oppose strongly an IMF recommendation to cap the state wage bill. This week the government averted a teachers’ strike after donors promised to step in.
According to the IMF the government insists that poor wages are sapping morale. Instead, Zimbabwe “would conduct a government payroll audit with a view to removing ghost workers”, the report says.
The IMF says Zimbabwe has agreed to further concessions on the currency front, which will see the budget presented in rands.
“Given the adoption of the rand as the reference currency the authorities concurred with the staff’s recommendations to present the next budget in rands, and mandate tax assessments in rands and adopt the rand as the sole unit of account for the public and private sectors in the near future.”
The IMF also wants to see the enactment of legislation “ensuring protection of property rights” — in effect a demand for an end to continuing farm seizures.
The fund says an improvement in Zimbabwe’s terms of trade, projected by the IMF’s World Economic Outlook, and an expected increase in foreign credit lines and private capital inflows would support growth. But an economic turnaround would not be possible without foreign assistance and private capital inflows, “even assuming sound policy implementation”.
The numbers show how far Zimbabwe has to go to pull its economy back from the brink. External debt stands at $5.1-billion (166% of GDP), while real GDP fell 14% in 2008, on top of the 40% cumulative decline between 2000 and 2007.
About 70% of Zimbabweans need food aid.
MDC calls for respect
The day after he returned from a tour of the United States, where he desperately sought financial support, Zimbabwe’s frustrated Finance Minister, Tendai Biti, issued an “ultimatum” over the outstanding areas of dispute between the partners in the country’s coalition government.
Biti, also MDC secretary general, also lashed out on Wednesday at powerful dissenting figures he said refused to respect “the new authority in town”. He did not name them.
Just as Biti was returning from the US, where he sought aid and the lifting of Western economic measures against Zimbabwe in exchange for political and economic reforms, police seized 18 activists who had been freed after the intervention of a joint committee of the coalition government.
They include prominent rights campaigner Jestina Mukoko, an 80-year-old MDC member, the MDC’s head of security and a journalist. Accused of plotting the violent overthrow of Robert Mugabe, they were abducted last year and kept at secret locations where, they say, they were tortured.
Critics immediately charged that this highlighted the MDC’s junior role in the coalition.
After Zimbabwe’s Prime Minister and MDC president, Morgan Tsvangirai, and leader of a breakaway faction of the MDC, Deputy Prime Minister Arthur Mutambara, met Mugabe on Tuesday, the activists were released, prompting claims by MDC officials that Tsvangirai has influence over the Zimbabwean president.
Biti told a media conference that the government has until Monday to resolve a range of outstanding issues, chief among them the appointment of key officials such as the attorney general and reserve bank governor and the allocation of governors of the 10 provinces. If this did not happen the matter would be referred to the MDC national council, which meets next Sunday.
Biti charged that some elements in Zanu-PF, the security forces and state-owned media pose a grave threat to the coalition, saying: “There are a number of toxic and poisonous attitudes that some of these institutions are showing. Their attitude is as if they are in a war situation.”
Zanu-PF spokesperson Ephraim Masawi denied the existence of a secret security cabal said to be the real influence behind Mugabe.
“We are also committed to the rule of law,” said Masawi. “If the courts, or the law, say those people should be arrested, then they should indeed go behind bars until they are cleared by the same courts. It is not political.”