Maravi

(TALKZIMBABWE) 'MDC to lose promised US$10 billion rescue package'

'MDC to lose promised US$10 billion rescue package'
Commentary
Thu, 16 Oct 2008 01:52:00 +0000

THE US$10 billion package promised to the Movement for Democratic Change party by the West could be affected as the West slides deeper into recession.

The much touted rescue package that many people had pinned their hopes on might not be forthcoming after all as news from the United States office for African Affairs indicated that the ongoing financial crisis could imperil United States aid available to Africa and could deter private investment on the continent.

Jendayi Frazer, U.S. Assistant Secretary of State for African Affairs, who is in Beijing for meetings with Chinese academics and officials on cooperation in Africa told reporters that she was concerned about the ability of the U.S. to fund African governments and bring in Foreign Direct Investment into the continent.

"It's a question that's concerning many of us who work on Africa," said Frazer to reporters in Beijing adding that commitments up to 2010 are unlikely to change but the situation thereafter is unpredictable.

The rescue package promised Zimbabwe was not factored into the Millennium Challenge program nor into the commitments up to 2010 and the US$10 billion package could well end at the level of rhetoric.

In contrast, Chinese investment and trade ties with Africa continue to grow. According to a recent report by Reuters news agency: “Sub-Saharan Africa saw GDP growth of 6.5 percent last year, the highest rate in decades,” thanks in part to increasing Chinese investment in the sub-region.

Western banks and foreign direct investors from the West are increasingly risk averse as they struggle to weather the current financial crisis whose domino effect is yet to be fully comprehended. Companies are closing down in the U.K. and U.S. and the unemployment figure in the U.K. currently standing at 1.7 million is likely to reach 2 million by the end of the year.

In what could come as a huge blow to the MDC party who have predicated Zimbabwe’s economic rescue on grants and loans from the West, Frazer said that aid monies for 2008 are already set – meaning that the promises made might not be honoured after all.

The U.S. will not fund Zimbabwe under the Millennium Challenge grants as those grants were already funded upfront. Frazer said the U.S. has already committed $3.9 billion in compacts with ten sub-Saharan African countries and there is not likely to be any additions to this grant after the formation of the all-inclusive Government in Zimbabwe.

Frazer added that “there are certain indications they (the U.S.) may have to rethink foreign assistance.”.

As the U.S. is slowing down activity in Africa, especially Sub-Saharan Africa, and looking to the Chinese for rescue loans, Chinese firms are currently providing financing and constructing dams, roads and rail as part of bids to develop resource projects on the continent.

Said Frazer: "The continent is perceived as one of instability and crisis and so it's hard to get private investment interested in the region... I do believe the financial crisis could impact private, foreign direct investment flows into Africa."

The MDC might have to rethink its strategy of rescuing the Zimbabwean economy. The ideas of the Washington Consensus might not be the best option at the moment, and the arguments over who controls the Finance Ministry will have to be well-thought out, given the current fluid global financial context.

The MDC might end up reluctantly adopting Mugabe’s “Look East Policy”.

Labels: COLOUR REVOLUTIONS, FINANCIAL CRISIS, MDC

posted by MrK @ 8:48 PM