Can this round of debt dialogue push Zim to reform?
CONSIDERING the government's dismal track record on resolving the debt crisis, the chances of success seem slim. Zimbabwe is once again trying to engage its creditors — Bretton Woods institutions and the Paris Club, in negotiating a reprieve around its debt arrears and unblocking access to credit. As a condition for debt dialogue, lenders insist the government embarks on a process of reforms.
The country owes around US$17 billion in public debt, a greater part of which (US$14 billion) is external debt. About 60% of this external debt is arrears or interest incurred through non-payment.
The country's currency is in free fall, losing over 90% of its value on the parallel market, and the Reserve Bank of Zimbabwe auction rate plays catch-up daily. Inflation is galloping at over 700% a year, and citizens are poor.
This time, the government has roped in major figures in global finance and politics. African Development Bank (AfDB) president Akinumwi Adesina is championing the process, and former Mozambican President Joaquim Chissano is the high-level facilitator.
The initiative is as much about politics as finance and economics. Chissano's involvement is intended to convince his liberation struggle comrades in the ruling Zanu PF party to begin the reform agenda in earnest.
Some believe the process could lead to genuine reengagement and offers the best chance of addressing the economic governance and political deficits of President Emmerson Mnangagwa's administration. The process has one thing going for it: goodwill from the United Kingdom and the European Union.
As a condition for debt dialogue, creditors insist the government embarks on a process of reforms.
A series of related meetings kicked off in December 2022. On May 11, the Finance ministry convened the fourth structured dialogue platform with creditors and development partners.
This was followed on May 15 by the high-level bebt resolution forum attended by Adesina and Chissano.
The high-level forum is the face of the process, while the dialogue platform is tasked with the technical nuts and bolts.
Key issues such as the reform matrices, scope of contentious matters and outputs are discussed and hopefully, agreed to, by the forum. At the technical level, working groups provide input on economic, governance and land tenure reforms.
To highlight the matter's urgency, another discussion was convened on the sidelines of the AfDB 2023 annual meetings in Egypt from May 22-26.
No official document from the latest structured dialogue platform has been shared. Updates from the AfDB website suggest progress around agreeing on definitions and criteria for measuring milestones.
Confidence in the process necessitates greater transparency. Interested parties, including the Zimbabwean public, must be able to track the gains using indicators for economic, governance and land reforms.
Adesina's latest speeches provide insight into the sticking points. He has kept the highly politicised, interrelated issues of sanctions, land reform and governance on the table.
The forthcoming polls, according to Adesina, will indicate the government's commitment to resolving governance and political problems. Much depends on free, fair and credible elections.
However, much depends on how and who will adjudicate whether the polls reflect progress or regression. Several observer missions gave the 2018 elections a clean bill of health, as did the Zimbabwe Electoral Commission (Zec) and Zanu PF.
But the process and results were rejected by the mainstream opposition, several domestic and international observer missions and domestic civil society groups. Views on the 2023 polls are already polarised and contested, as they have been in every election for the past 23 years.
Adesina said the working groups and high-level dialogues agreed on six areas for reforms: the judicial sector, public sector transparency and accountability, combating corruption, human rights promotion, electoral, and national unity, peace and reconciliation. Security sector reforms don't feature, despite their distinct influence in the political arena.
He says the government has pledged to bring greater clarity and coherence to Zimbabwe's financial and economic sectors.
This includes eliminating multiple exchange rates, introducing an enhanced foreign exchange auction market, and avoiding off-budget financing.
The AfDB process hinges on the government's commitment to walk the talk. However, the ruling party's stance on governance and economic management gives little indication that it will follow through with reforms.
Zanu PF's command-and-control approach is antithetical to the market economy imperatives that AfDB is encouraging it to adopt. Despite having had five years to liberalise the exchange rate and rein in fiscal indiscipline, government has little to show.
Zanu PF's approach is antithetical to the market economy imperatives that AfDB is encouraging it to adopt
While there is hope, there's also considerable scepticism. Promises to compensate white farmers, for example, haven't resulted in significant action. Adesina says further delays in paying compensation could erode trust and confidence, which must be built with several stakeholders.
The United States, though participating, is approaching the high-level forum with guarded optimism. As required by its legislation, the Zimbabwe Democracy and Economic Recovery Act, it would need to see concrete reform progress before entertaining a removal of sanctions.
Most Zimbabweans aren't holding their breath. There has been no progress on resolving the debt crisis, despite the government's promises of arrear clearance made to creditors in Peru in 2015.
In 2021, the Zimbabwe debt management strategy died a natural death due to inaction. So did the Zimbabwe accelerated arrears clearance, debt and development strategy and the 2011 Zimbabwe accelerated re-engagement programme.
The government needs to build trust with its internal stakeholders. If this can be done, the high-level debt resolution forum could work, unencumbered by political agendas.
Right now, the process is the only game in town that could engineer a meeting of minds and actionable deliverables. At the very least, it should foster a candid discussion on much-needed governance and economic reforms.