News Column

Finance Minister Panics Over Economic 'Meltdown'

May 2, 2014

Elias Mambo

AFTER failing to secure an economic rescue package from China, South Korea and Kuwait as well as a reprieve from multilateral lending institutions, Finance minister Patrick Chinamasa is running scared as he has briefed the Joint Operation Command (Joc) -- which brings together the army, intelligence services and the police -- suggesting the issue is now treated as a national security matter.

Informed government sources say Chinamasa, under pressure to deliver a workable matrix to rescue an imploding economy, presented a report to Joc clearly showing since President Robert Mugabe and Zanu PF won the elections last year, the economy has been on a downward spiral but no one, including the so-called "all weather friends" such as China, are willing to bail out the country.

Sources close to the issue say Joc met on April 17 after five months of no get-togethers citing different reasons, including the absence of some members like Presidential Affairs and Intelligence minister Didymus Mutasa who has been sick, to assess the economic situation and its security implications.

The sources say the security service chiefs are anxious about the state of the economy insofar as it impinges on security matters and are pressuring the already harried Chinamasa with demands to find ways of reviving the economy before the situation spins out of control.

"Chinamasa reported that international financiers and countries approached were reluctant to offer a rescue package and lines of credit to Zimbabwe due to its bad debt record, poor credit rating and political risk.

"He also said mobilising resources had become a challenge because institutions such as the International Monetary Fund (IMF), World Bank and African Development Bank (ADB) are owed billions of dollars by Zimbabwe," a source said.

After the elections Chinamasa met the ABD, IMF and World Bank, among other multilateral lenders, seeking financial bailouts.

The World Bank'sOctober 2013 report on Zimbabwe said the country was facing downside risks in agriculture; political uncertainty during the run-up to elections resulting in low business confidence; liquidity challenges and very high real interest rates on short-term credit; ballooning wage bill in the public sector; ailing infrastructure; possible compression of exports on the back of the fragile and slowdown of the global economy; potential destabilising effects of the indigenisation programme on the economy and disorderly unwinding of vulnerabilities in the banking sector.

Chinamas also approached China, South Korea and Kuwait without success.

Early this year, Chinamasa returned home empty-handed from his trip to Beijing where he was told there would be no bailout but bankable projects funding. Chinamasa, accompanied by Deputy Foreign Affairs minister Christopher Mutsvangwa, failed to convince the Chinese business community in Beijing and Shanghai to loan Zimbabwe funds using the country's minerals as security.

Through securitisation of minerals, Chinamasa was hoping to get US$10 billion in funding to finance the ambitious ZimAsset, a policy document pitched as the panacea for economic revival by the Zanu PF government, which needs US$27 billion.

Sources say Chinamasa's approach to Joc was an indication that he had run out of options.

"The minister's meeting with Joc on April 17 clearly shows he has run out of options and now wants the economy to be handled as a security matter so that decrees and other unorthodox interventions can be made," a source said.

"While Joc is obviously keen to understand the state of the economy to assess its impact on security matters, they have no solution to the economic problems at hand. It was easy for them to manipulate elections but they can't rig the economy."

A senior government official said it was alarming Chinamasa was now approaching Joc.

"What do they know about the economy? People who have not even read Adam Smith, not just the Wealth of Nations but mostly significantly The Theory of Moral Sentiments, which is more important," the official said. "He is working hard but that's the wrong way of doing it. His proposals have been rejected by colleagues and now he wants interventions by decrees. He needs a team of competent economists and advisors to come up with serious economic matrices to rescue the situation."

To try to cultivate good relations with the IMF, he has continued with Staff Monitoring Programme (SMP) which although it does not include financial assistance or endorsement by the IMF executive board helps to improve relations.

An IMF staff mission, led by Mr. Alfredo Cuevas, met with Chinamasa and other senior Zimbabwean authorities in Harare during March 12-26 2014 to discuss the SMP and state of the economy.

The IMF team held discussions Chief Cabinet Secretary Misheck Sibanda, Mining minister Walter Chidhakwa, Indigenisation minister Francis Nhema, Advisor to President Robert Mugabe Timothy Stamps, then acting Governor of the Reserve Bank of Zimbabwe Charity Dhliwayo, Chinamasa and other senior government officials, as well representatives of labour, business, civil society, and development partners.

Chinamasa was in Washington DC early this month for IMF spring meetings.

The IMF mission's discussions covered recent economic developments and the near and medium-term outlook and risks for Zimbabwe; implementation of the policies and reforms under the SMP; and measures to restore fiscal and external sustainability, enhance financial sector stability, and unlock the country's potential for sustained growth and poverty reduction.

In recent years Zimbabwe's economy expanded following more than a decade of decline that culminated in hyperinflation, but the rebound phase of its recovery is over. Growth decelerated in 2013 and real GDP was just above 3% percent, a sharp decline from 10,5% in 2012.

Just as Chinamasa warned Joc, the IMF equally painted a gloomy picture of the situation during its visit to Zimbabwe in March. The World Bank's latest report does point out similar issues .


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Source: AllAfrica