US retreat from debt talks shows ideological hysteria

ZIMBABWE fell behind in servicing foreign debts to the World Bank, the African Development Bank and the European Investment Bank for a range of reasons, some generated internally and some external.

The Second Republic wants to fix this, is already budgeting some money towards making modest payments, that largely are intended to show willingness and confirm that Zimbabwe does not wish to repudiate the debts and acknowledges that it owes the money.

Normally, a country that was in arrears, but which had fixed its budgeting processes, was applying high levels of fiscal discipline, but which needed a degree of assistance to sort out the debt mess, would be able to follow a number of paths. Zimbabwe is not the only country in this fix and there are routes and ways round the problem.

But Zimbabwe is not a typical country in debt and in arrears. For more than two decades it has been under a strict set of sanctions that make it exceptionally difficult to go the normal route, and as a consequence the problem actually gets worse as interest payments add themselves to the debt.

The financial sanctions that really matter are those imposed by the United States, which has around 20 percent of the voting power in the World Bank and International Monetary Fund and a significant block of votes in other organisations.

By US law, the American representatives in each of these organisations are forbidden to approve not only new loans, but the debt forgiveness and debt rescheduling that are normal.

The US managed to assemble a majority in some organisations, largely through its British and European allies, but that majority was built on the massive voting block that the US wields by itself. Almost any non-consensus voting in the World Bank and similar institutions will follow the wishes the of the US.

But things are changing. The European Union and its members states have been showing a more nuanced relationship with Zimbabwe, and in many quarters are willing to look at the evidence and at the measures the Government itself has taken.

This could well lead to a switch in voting or support, or at least more abstaining. That could well break the sanctions majority.

Zimbabwe might well be too well off to qualify for debt forgiveness, but in normal circumstances would have been able, once it fixed its own national fiscal policy, budgeted wisely and took responsibility for its own spending, to qualify for a debt rescheduling.

Since we have done the necessary preliminary work, largely because it was the right way to get our economy growing again, sanctions or no sanctions, we could then tackle the arrears.

The normal route would be rescheduling and as the arrears were rescheduled, and a payment plan agreed, Zimbabwe would have the required clean sheet to qualify for new low-interest financing for major capital development and perhaps even IMF backing for currency reform.

One curious fact is that some of the new money that would become available would be used to pay off the previous land owners when their land was nationalised under land reform for the improvements they made on that land. While the land itself will not be compensated, this is not really a moral issue as originally the land was alienated for military service in the conquest of the country or sold off for minuscule amounts after being grabbed.

The serious value of a developed farm, rather than just a swathe of land held for speculation, were the improvements and the Government agreed that it would pay for those improvements.

Loan funds would now almost certainly be available, but for the sanctions pressure, since the Second Republic implemented the second half of land reform.

The first programme was simply reallocating land; the second half has been the creation of a range of programmes that allow those who benefited to use that land profitably.

We are now in the position with the record tobacco, maize, traditional grain and wheat crops to see that already the land that came under land reform is producing more under its new users than it did before land reform.

From an international banker’s point of view that means that somewhere along the value chain there is enough new money to repay any loans incurred to buy out the improvements.

This new money would a combination of the VAT that a former subsistence farmer pays when they buy something with their new income, the extra company tax that the supplier who sold the farmer the goods, and so on.

Sanctions were instituted over land reform, but since the Government and the former land owners have struck a deal, and since the land is now increasing rapidly in productivity and producing ever more wealth, the whole basis of sanctions now makes no sense at all, unless it is over ideology rather than fact.

So one would imagine that there would be a general agreement of sorting out the Zimbabwean arrears and working out how Zimbabwe can once again become a normal benefiter of the development funding world.

This is the basis of the whole process now in place, with the African Development Bank taking the lead among the global lenders who are owed money, to work out the arrangements.

Many countries that have been applying sanctions, or at least showing any lack of friendship to Zimbabwe, have been willing to at least listen seriously and are willing to be at least part of the process.

Even the United States, at the beginning, was willing to be involved, at least as a listener. Now it has pulled out of the discussions, on the basis that the politicians it backed in the August elections last year did not win.

The United States either believes it has a right to decide how other people should vote, a supposition that it would totally reject if someone else told Americans how to vote, or its policy makers are daft enough to believe that no one could possibly vote for the present Zimbabwe Government.

In any case the biggest elephant among the global banking shareholders has now effectively said that it will not co-operate in any way over anything to do with Zimbabwe unless the Zimbabweans elect a government that the United States wants to see and approves of. The US does not even want to listen. However, it is unlikely that anyone else will pull out.

Zimbabwe’s re-engagement policy is not asking anyone to agree with, or disagree with, the Zimbabwean Government. What it is doing is asking people to talk, to listen, to keep an open mind, to see how the people of Zimbabwe can move forward together. In other words to treat Zimbabwe as a normal country.

Of course that normalisation does require Zimbabwe itself to help itself, and this is another major plank of the Second Republic, that despite the challenges we need to move forward and that requires good governance and sensible, innovative and practical policies that push economic growth and make sure that everyone benefits from that growth.

But this is something we all really want, for ourselves, so it cannot be a condition for normalisation, rather the reverse, that normalisation is possible since we are doing so much for ourselves.