Wednesday, October 19, 2005

Zimbabwe Running On Empty

By Brendan Boyle
Sunday Times (South Africa)
October 9, 2005

Zimbabwe renewed its appeal for financial assistance from South Africa after the International Monetary Fund (IMF) rejected its bid for a partial return to the global lending community.

In its comprehensive review of Zimbabwe's economic performance over the past five years, the IMF report reflects a government clinging to shreds of optimism while the country spirals towards collapse.

"After some improvement in 2004, Zimbabwe's economic and social conditions have deteriorated sharply this year," the IMF staff said in their report on a visit to Zimbabwe in July. "Without a bold change in policy direction, the economic outlook is bleak."

IMF analysts have warned that Zimbabwe’s external debt, which is already worth 67% of the current GDP, is unsustainable and would have to be rescheduled by 2010.

Some of the problems leading to the decline of the economy in Zimbabwe include:

*Gold output halved from 1998 to 2003;
*Coal production, soy and wheat acreage, cattle and pig slaughtering and milk production all halved between 1998 and 2004; and
*The manufacturing volume of foodstuffs, drinks, textiles and metals are below half their 1990 levels and the overall manufacturing index is at 58% of 1990 output.

In less dismal news, the IMP also reported that the formal banking sector is resilient, and there is a promising improvement in platinum production.

In their assessment of the staff report, the IMF's executive board warned Zimbabwe's government that failure to implement tough reforms would hurt poor people the most.

After discussing the staff report, the directors proposed a series of interventions to stabilize the macroeconomy as quickly as possible and then lay a foundation for increased domestic productivity and improved export earnings.

After repeatedly reneging on debt payments to the IMF, Zimbabwe was suspended from technical assistance and lending and came close last month to becoming only the second country ever to be expelled completely from the fund.

As the political and economic climate in Zimbabwe continues to worsen, what effect will this have on the stability of the whole region? Zimbabwe recently made multi-million payments to the IMF to reduce its arrears, and bought itself a six-month reprieve from talks of expulsion. Was this money well spent? Or, as some critics say, should the money have gone to directly benefit the 70% of the Zimbabwean population that is living below the poverty line?


Anonymous said...

Quite incredible the comings and goings with the Zimbabwe economy. Any help from the IMF that is not coupled with political reform will be simply sustaining the suffering of the poor in Zimbabwe. There can only be an African solution to this travesty and the only African that has the answer is Mbeki. The IMF's involvement or lack of involvement is almost irrelevant, doing little more than stalling the ineviatable, this downward spiral is too deep and only political upheaval will stop it.

Anonymous said...

The relevance of the IMF's involvement in Zimbabwe is indeed questionable. This comes as no surprise. There has always been a disconnect between the solutions of the Bretton Woods Institutions and the (political) reality on the ground.