Home » Industry » Leveraging the West for Zim-Asset Funding

Government’s Zim-Asset blueprint, despite taking off in earnest and seeing a number of projects and deals signed under its auspices, seems beset by an overarching funding gap.

A quick assessment of discussion papers and editorials on Zim-Asset, and workshops and stakeholder meetings that have been held to date, funding appears to be one of the most low profile elements of this sound economic strategy.

It is the lessons of history that serious funding is a pre-requisite for the success of any ambitious economic strategy.

Without funding to jump start the slow economic growth, and to accelerate the replacement and expansion of the state capital to finance Zim-Asset, the Government might struggle to meet its target to fully implement Zim-Asset by 2018.

The serious dollar gap that is plaguing Zimbabwe has mainly been a result of unilateral financial restrictions imposed by the West following the Zanu-PF Government’s fast-track land reform programme, and subsequent policies such as indigenisation and economic empowerment, which Washington and Brussels have opposed and sought to undermine.

Others have argued that Zimbabwe’s poor credit rating has seen Government struggling to secure finances to fund the Zim-Asset.

However, though that might be the case, the history of the Bretton Woods institutions shows that extension of funding to countries in financial distress is determined more by politics than by economics.

Indeed, in the 1980s, the IMF continued to lend to problem debtors such as apartheid South Africa, El Salvador and Haiti countries which had more serious compliance issues with IMF conditionalities than today’s Zimbabwe.

Also, with the sort of exceptional access that the Fund has granted to states such as Greece, Portugal, Ireland and Ukraine, Zimbabwe, in principle should be able to borrow substantially from the IMF and World Bank.

The politicisation of credit has not only been confined to the international funding institutions (IFIs), but also to private credit.

With Western governments reluctant to extend any credit to Zimbabwe, private banks in Europe and America rarely act against Washington, London and Brussels’ preferences.

For example, banks such as Barclays or HSBC, typically make decisions on lending based on an understanding derived from comments of politicians, foreign policy think tanks and academics that aise the British government on Zimbabwe.

Shut out of both IFIs and Western private capital markets, Zimbabwe has strategically attempted to use global development trends, in particular the emergence of China and the re-emergence of Russia on the international scene to benefit it.

This strategic move culminated in the “Look East Policy,” in which the Zanu-PF Government strengthened its relations with the two economic giants.

However, despite pledges on numerous occasions, to date, China has been apparently reluctant to finance the Zim-Asset economic strategy.

Rapidly expanding trade and investment ties between China and the West explain Beijing’s cautious policy towards bailing out Harare’s economic blue print. Indeed, China is reluctant to jeopardise hundreds of billions of dollars worth of trade deals between Beijing and the West.

While each year China and the US and EU agree to dozens of mostly economic deals, Zimbabwe can only count a handful of major deals in the last five years, most which are still to materialise.

This not only reflects the reality of the strength of US-China relations, but also tells us that the logic of these g ties will push China to seek ways to limit its support to Zimbabwe if this means confrontation with Washington and Brussels.

Thus, despite the political strength of Zimbabwe-China relations, the reality is that Beijing values much more, opportunities presented by Western led international economic order.

Indeed, it is not unreasonable to say that China has more robust diplomatic and economic ties with the US and EU than with Zimbabwe.

Zimbabwe has also turned to Russian for financial support.

But with harsh economic sanctions imposed by the European Union and United States damaging Russia, an external debt of $700 billion, dwindling foreign reserves, and a crisis ridden economy which is projected to contract by 2 percent this year, it is unlikely that the giant will extend any financial help to states that are not within its strategic realm.

Indeed, the Russian government itself is struggling to raise money from private creditors and IFIs.

Even having helped create the new BRICS Contingent Reserves Arrangement (CRA), to avoid borrowing from the West, Russia still needs to be on the IMF programme to borrow substantial figures.

Struggling to raise cash, it is inconceivable to imagine the Zim-Asset economic blue-print.

Had it been a decade ago, the BRICS nations would have provided another non-Western potential source of funds.

However, these states’ current dire economic situation which has seen them seeking funds from international financial markets, is unlikely to see them extend substantial funding to Harare any time soon.

Having been affected by the most recent global financial crisis and subsequent economic downturn, these countries are still repairing their balance sheets due to financial crisis.

This leaves the West as the most obvious source of funds to finance Zim-Asset projects. The Zimbabwe government needs to expedite its economic re-engagement with the West and its concomitant institutions the IFIs and Western based private financial institutions.

Indeed, the Zim-Asset document, acknowledges the importance of re-engaging Western funded and controlled international financial institutions (IFIs) the World Bank and IMF.

Also, at the December 2014 congress themed “Accelerated Implementation of Zim-Asset”, the ruling party, Zanu-PF emphasised the need to continue with efforts to re-engage with international financial institutions, and the capable Finance Minister Patrick Chinamasa underscoring the importance of Western financing has since declared his love for the IMF and World Bank.

In order to access funding from the IFIs and private credit markets, the Zimbabwe government needs to pull all stops to accelerate the normalisation of relations with the West.

The reality is that Washington and Brussels’ grip on the global financial order is firm, and our access to international financial markets is depends on our relations with West.

The very patient West has little to lose from strained relations than Zimbabwe.

Is it there still prudent to continue to ignore this reality at the cost of our country?

The economic and social challenges that we have faced in the last 15 years, and financing problems facing Zim-Asset indicate that it is not.

The government needs to adopt a skilful diplomatic strategy that will enable the country to extract substantial financial benefits, and at the same time protecting the nation’s sovereignty, vital interests such as its abundant resources and the successful land reform programme.

The small amount that the EU recently aanced to Zimbabwe recently is an opportunity to ramp down tensions still left over from the 2002 to 2013 period and an opportunity to accelerate the normalisation of trade and economic relations between Zimbabwe and the West.

On the other hand, the EU needs to show diplomatic maturity by removing sanctions against President Mugabe and his wife.

Zim-Asset is a noble economic blueprint.

With adequate funds, the strategy is an investment that has the potential to pay incalculable dividends.

Tinhu is a researcher, political and economic analyst-based in Harare.

Source : The Herald