Zimbabwe’s past weighs on the economy

via Zimbabwe’s past weighs on the economy ZimbabweMail By Frank Chokowore

Zimbabwe is trying to negotiate relief on its foreign debt. Critics say the diamond industry, despite lifted sanctions, is not playing its part.

President Robert Mugabe’s new government is faced with a burden of foreign debt that has ballooned to $10.7bn, including arrears, while the country’s economic growth looks uncertain.

The World Bank’s country economist for Zimbabwe, Nadia Piffaretti, says Zimbabwe requires at least $33bn to turn around its economy over the next 20 years.

In addition, critics say investors may be scared away by the government’s assertions that it will speed up implementation of its indigenisation policy, which requires all foreign-owned companies to cede at least 51% of their shareholding to Zimbabweans. 

Lifting sanctions

According to the International Monetary Fund (IMF), Zimbabwe’s external debt was 88% of GDP at the end of 2012.

Zimbabwe owed $994.2m to the World Bank at the end of May 2013 and $592.3m to the African Development Bank (AfDB) at the end of April. Apart from foreign debt, Harare is also striving to clear its internal debt.

In a June policy statement, the finance ministry put domestic arrears to telecoms, water and electricity companies at $101.4m.

Finance minister Patrick Chinamasa told The Africa Report that the government will do all it can to clear its debt.

“We are working round the clock to service our foreign debt, but we are also asking for debt forgiveness because this country’s economy has not been performing well as a result of sanctions imposed on us,” he says.

Mugabe, who has extended an olive branch to the West through a re-engagement agenda, says targeted sanctions imposed on him and his inner circle for election rigging and human rights violations should be lifted unconditionally.

In late September, the European Union (EU) lifted sanctions against the state-owned Zimbabwe Mining Development Corporation (ZMDC), which operates in the Marange diamond fields through joint ventures.

The military is also heavily invested in the diamond fields, after taking the land from artisanal miners.

The EU’s move – backed by a powerful diamond lobby in Europe – will help the ZMDC, but it does not clear the air in terms of transparency in the sales and marketing of the gems.

Farai Muguwu, director of the Mutare-based Centre for Natural Resources Governance, says Zimbabwe could improve its economy if the proceeds from diamond min- ing find their way to the treasury.

Authorities are reportedly investigating a case in which more than $130m worth of diamonds from the Chiadzwa field disappeared.

“There needs to be transparency in the sales and marketing of the diamonds and ensuring that all revenue finds its way to state coffers,” says Maguwu. 

Opposition complaints

Former finance minister Tendai Biti of the Movement for Democratic Change (MDC) said diamond companies operating in Marange did not remit returns to the treasury.

The MDC also criticised Mugabe’s appointment of a finance minister with little knowledge of economics.

“Chinamasa is just a mere lawyer and to appoint him the finance minister is a mockery on the Zimbabwean people who are yearning for economic progress,” said Douglas Mwonzora, an MDC spokesman.

The IMF signed a Staff-Monitored Programme (SMP) in June 2012, and the government launched the Zimbabwe Accelerated Debt and Development Strategy during the same year.

The IMF, which had not worked with Harare for more than a decade, highlighted the government’s plan to issue a statutory instrument by the end of June to establish a clear formula for diamond revenue management.

In September, officials in the finance ministry said they were preparing a dossier to send to the IMF.

The SMP ended in December.

However, IMF managing director Christine Lagarde was evasive about whether Harare would be able to clear its arrears: “We don’t want to jump to conclusions before anything is revisited, so we will make statements once we have assessed the situation.” – Theafricareport