Will Zim’s current Esap II work?

Source: Will Zim’s current Esap II work? – The Zimbabwe Independent August 31, 2019

The bond notes were introduced last year to help ease cash shortages.

In the weeks leading up to the poorly kept secret of his impeding appointment as Minister of Finance, Mthuli Ncube campaigned hard for the position, coming out of a long diasporan silence to write articles outlining what he would do to tame Zimbabwe’s unwieldly economy. His many slavish supporters hyped up his scholarly qualifications, the international financial institutions where he had been a functionary and so forth.

It was as if the man could walk on water like Jesus purportedly did, or jump over skyscrapers with a single leap, like Superman. Given all the hyperbole around him, his eventual appointment in October 2018 was almost an anti-climax.

It was not long before he began to backtrack on some of the views he had expressed prior to his appointment, such as the need to swiftly “abolish” the widely derided “bond note” currency/non-currency (and it really depends on who you ask, and what time of day it is).

Having been parachuted into his position after more than a decade in places like South Africa, Tunisia, Switzerland, the Zimbabwean social, economic and political realities quickly and rudely began to dawn on him.

His unwise forecasts on when things would begin to normalise began to shift with the wind, depending on which audience he happened to be addressing. Every time he said “six months”, it was as if he had forgotten that the internet never forgets! It turned out that a Ncube’s “six months” is as undervalued as the US dollar was in the mad, mythical period of it being officially pegged at “one-to-one” with the Zimbabwean dollar!

Holding on to the fiction of the parity between those two currencies — despite pre-appointment pledges to let go of that fantasy and let the market determine the rate between them — was yet another factor that quickly began to dent Superman’s credibility. When reality could no long be ignored and the Zimdollar was allowed to float, it was done in an arrogant, capricious way that gave no nod at all to the fact that he had flip-flopped on the issue. Instead of getting accolades for accepting the exchange reality out on the street, his grudging official acceptance of that reality only earned him more scorn and distrust.

But Ncube is not one to admit mistakes or self-contradictions. Reminders of his flip-flopping or his widely off-the-mark targets were simply brushed off with “we know what we’re doing”, despite “the market” in which he claimed to be a strong disciple, showing that it stubbornly disagreed. Many policy adjustments were made on-the-fly, making a mockery of the arrogant confidence with which those policies had first been announced, even amidst strenuous disagreement from key stakeholder sectors without whose cooperation his reforms cannot work. When he has to flip-flop in response to market and stakeholder resistance to some policy measure of his, he just hunkers down and pretends he never pronounced the policy he was renouncing, and bullishly plows ahead.

Alas, while a professor can get away with intimidating, talking down to and bulldozing his students because their progression to a large degree depends on his approval, the real world of “the market” and the political and economic publics are much more stubborn.

Months shy of the first anniversary of his appointment, his so-called “austerity for prosperity” plan appears to be ruthlessly on course, but at the cost of socio-economic devastation across the land. No matter what happens now, it is clear as never before that his “six month” projections were either a cruel lie or bad joke. Alternatively, perhaps Ncube just did not comprehend what the effects of taking the International Monetary Fund’s “austerity” dogma and applying — lock, stock and barrel — to Zimbabwe’s real-life situation.

Yet this is Zimbabwe’s second attempt in living memory to implement what is essentially Esap II (Economic Structural Adjustment Programme). What went wrong the first time that moved the regime of then president Robert Mugabe to abandon Esap I mid-stream? How, if it all, have the lessons of that first nasty “austerity” experience been applied by Ncube to attempt to prevent the socio-economic devastations and protests that forced Mugabe to scupper the implementation of Esap I?

One of the unspoken expectations of many was that “the professor” had a special bag of economic tricks up his sleeve. Surely with his long curriculum vitae and his love for the use of impressive-sounding economic jargon — even when talking to audiences that know very little about textbook economics — surely with all that big talk and hand-waving, he must have had a special, secret plan?

Only to find out the “special, secret plan” of the man from Oxford University was simply to introduce Esap II! Alas! No original or brilliant economic recovery plan for Zimbabwe from Superman!

The IMF’s Esap-based austerity script is well-known all over the world, including in Zimbabwe, which is one reason it seems so astonishing that this is what Ncube came all the way from faraway Switzerland to implement. It is meant for countries like Zimbabwe in deep economic trouble, including being way behind and unable to service their debts, and unable to productively kick-start their way out of the doldrums to prosperity. Unable to borrow on the market, they crawl on their knees to the IMF to plead for bailout debt under virtually any conditions.

Those IMF conditions for debt are what we are being subjected to in 2019 Zimbabwe, not any special “prosperity plan” coming out of Ncube’s head!

This also explains why his assessments of his own performance vastly differ from those of the average Zimbabwean.

He defines the success of his efforts by how closely and to-the-script he is following the Esap II plan that has been laid out for him as a pre-condition for accessing funding from the international financial institutions. His pre-occupation is not the effect of that script on the long-suffering and increasingly impoverished people of Zimbabwe!

When he jumps back to kiss himself over his self-claimed “budget surplus”, as he does at every opportunity, it is not so much to convince a sceptical and unimpressed Zimbabwean public as to try to convince his bank manager at the IMF that he is doing a good job. Having the IMF embedded as supervisors at the Finance ministry as part of a Staff-Monitored Programme is marketed as if the gods have smiled upon Zimbabwe and manna is about to rain down from heaven.

Will Ncube’s IMF-ordered Esap II work any better than Esap I did? If you pay close enough attention to his carefully crafted confusionist rhetoric, he intends or hopes that having proved what a disciplined, hard economic taskmaster he is against the screaming Zimbabwean public, the IMF will then pat him on the back as a good boy and advance Zimbabwe a “bailout” package, in the form of the first new external debt in a long time.

Many readers will ask: what is wrong with that? Surely, Zimbabwe badly needs an external cash injection, does it not? Are you not just criticising for the sake of it? That depends on the purpose for which that new debt is being incurred.

What is that debt to be invested in? To what brilliant use does Ncube intend to put that loan? Would that help Zimbabwe transition from austerity to prosperity? Ncube’s idea is to use the new IMF debt; wait for it … to pay off other debt! Out of all these games and schemes, it is hoped that eventually — somewhere down the line, somehow, some way — we can then begin attracting investment and actual productive debt!

What are the chances that this harebrained “economic plan” will work any better this time than it did under Esap I1, or than it has done elsewhere?

The issue before us is not whether Zimbabwe badly needs reforms or not. Rather, it is whether going back to the IMF to essentially let its Esap-debt conditions determine Zimbabwe’s policies is the only or best way. Where — and in which public or private forums — have the pros and cons of adopting Ncube’s Esap II (disguised as “austerity for posterity”) been discussed and agreed on?

Ncube is not used to being questioned about his almost embarrassingly unquestioning acceptance of IMF-style austerity dogma. Yet in the decades it has been experimented with across the globe, there are many thoughtful voices who would say it has mostly wreaked havoc on the societies it has been inflicted on. After seeing the long-term destruction this latest version of Esap has caused in Zimbabwe in less than a year, it is time to interrogate it.

It is time to question whether there is any prospect of an IMF/Mthuli Ncube-authored prosperity on even the distant horizon, or whether it is yet another pie-in-the-sky scheme that will leave this country more indebted, less productive, poorer and even less able to eventually stand on its own feet than it is now.

Makunike is a local economic commentator.