Ndamu Sandu
23 August 2008
Zimbabwe requires external support from multilateral financial institutions to stabilise its recovery, an economist with the World Bank said last week.
Zimbabwe has been in arrears with the International Monetary Fund, World Bank and the African Development Bank since 1999 and owes the three institutions a staggering US$1.2 billion.
Dr John Panzer, who manages the group of economists responsible for economic analysis in 12 countries in Southern Africa, told the Just Business forum on Thursday that external support would help finance the rebuilding of physical and human capital. He said external support was critical in softening fiscal adjustments during stabilisation. Zimbabwe has been financing its budgets since the drying up of balance of payment support in 1999.
"External support adds credibility and hence enhances likelihood of success of a stabilisation programme," he said. Thursday's Forum, organised by the American Business Association of Zimbabwe drew participants from strategists in business; potential foreign investors and political leaders with an array of local and international speakers.
Panzer said the country needed to demonstrate a readiness to re-engage the multilateral institutions.
"The country needs to demonstrate readiness and willingness to work with us. Readiness interpreted as macro-stabilisation and sound development policy to achieve economic and social development under good governance," he said.
"There is nothing to suggest that if Zimbabwe demonstrates readiness support would not be forthcoming."
Panzer said multilateral institutions could only move forward if arrears were cleared, adding that Zimbabwe's debt was not sustainable and would require debt restructuring and forgiveness.
Although there was a provision for debt forgiveness among poor countries, Zimbabwe did not belong to the group and this posed new challenges.
"Zimbabwe has to be brought into the club. The club is an expensive club," he said.
The World Bank economist proposed a reform of the monetary policy and debt service after arrears have been cleared but said the international community would come in a supportive role. Zimbabwe has been critical of policies "imposed" by foreigners.
Panzer said the success of stabilisation and speed of recovery "will depend on commitment to policy reform and consistency in implementation".
Asked to comment of the government's "Look East" policy, Panzer said the policy of the country need to look North, South, East and West for comparative advantages.
"If looking East means I am not going to reform economy, good governance . . . then that policy is bad," he said. "If looking East is to bypass quality of economic management, then it is a bad policy."
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