Maravi

(TALKZIMBABWE) Zimbabwe still has friends, Mr Biti

Zimbabwe still has friends, Mr Biti
By: EDITORIAL COMMENT
Posted: Saturday, March 13, 2010 11:05 pm

ZIMBABWE's finance minister, Mr Tendai Biti, recently said that Zimbabwe is now alone as the IMF has indicated that it is not prepared to loan Zimbabwe any money at the moment.

“We are not going to get outside help from anyone. Last year we got $30 million from South Africa and $5 million from China, the credit lines are not going to be extended to Zimbabwe again. We are going to be alone,” said minister Biti.

“No outside country is going to come and help us, let it be not an illusion to anyone,” he added.

The U-turn by a party that promised a lot to the Zimbabwean people is an eye-opener. Zimbabwe has been alone for the last ten years under sanctions.

However, Mr Biti's tone amounted to scaremongering; and this is very troubling.

Zimbabweans have shown resiliency in the face of ruinous sanctions. Mr Biti should get on with his job. He has to find solutions. He is the finance minister. He is in government and in Cabinet.

His statement, which is nothing new to the struggling masses of Zimbabwe is tantamount to admitting that he does not know what else to do about the situation in the country as finance minister; or simply cannot be bothered with diplomatic efforts to re-engage the country.

Mr Biti should now reprioritise and stop his intention to declare Zimbabwe as a Highly Indebted Poor Country (HIPC).

How this programme is supposed to work when no-one is prepared to deal with Zimbabwe is anyone's guess.

The challenges that Mr Biti faces as finance minister are endless.

There are a number of toxic financial, political and social topics that Biti has to contend with as the chief financial person in the country.

Mr Biti faces a backlash from sectors of the economy that the MDC-T party made promises to; including civil servants, industrialists and labour unions.

A note on HIPC

Recently, Mr Biti has been seeking HIPC status for Zimbabwe; despite the vast mineral wealth and rich soils the country is endowed with.

The reason why big corporations weathered the storm in Zimbabwe for the last ten years is because of that endowment.

The minister should be reminded that since its founding the International Monetary Fund, which he is fascinated with, has never achieved success in the developing world.

A few examples would suffice.

When Ecuador adopted an IMF programme in January 2000, it was ordered to raise the price of cooking gas by 80 percent, eliminate twenty-six thousand jobs and cut real wages for the remaining workers by 50 percent in four steps and on a timetable specified by the IMF. By July 2000, Ecuador had to transfer ownership of its biggest water system to foreign operators, then grant British Petroleum rights to build and own an oil pipeline over the Andes.

The IMF had 167 'detailed' loan conditions for that country; more than any country (especially of that size) could handle without "selling its soul".

One writer jokingly commented that the plan looked less like an 'Assistance Plan' and more like a blueprint for a financial coup d'état.

Yet Ecuador, once an OPEC member had vast resources prior to the programme.

How did it end up in such a pickle?

In 1983, the IMF forced the Ecuador government to take over the soured private debts Ecuador's elite owed to foreign banks. To do so, Ecuador's government borrowed $1.5 billion from the IMF. For Ecuador to pay back this loan, the IMF dictated price hikes in electricity and other necessities. Those price hikes failed to service the loan. Yet another 'Assistance Plan' was devised: cut 120,000 civil workers.

Ecuador was also foolishly forced to 'liberalize' its tiny financial market, cutting local banks loose from government controls and letting private debt and interest rates explode.

The IMF also made liberalization of the nation's banking sector a condition of another 'assistance plan'. These were taken over by foreign businesses and the country was effectively controlled by big corporations with a client government, high levels of poverty and social unrest and political instability.

In Tanzania, the IMF and World Bank promised to reduce HIV infections and deaths from AIDS.

They had a "brilliant neoliberal solution" which required Tanzania to charge for what were previously free hospital appointments. Since the Bank imposed this requirement, the number of patients treated in Dar es Salaam's three big public hospitals had dropped by 53 percent after the first year.

The Bretton Woods twins also ordered Tanzania to charge fees for school attendance, then expressed surprise that school enrollment dropped from 80 percent to 66 percent after two years of the 'recovery plan'.

In a nutshell, the IMF cut trade barriers, limited government subsidies and sold off state industries. In just fifteen years Tanzania's GDP dropped from $309 to $210 per capita, literacy fell and the rate of abject poverty jumped to 51 percent of the population.

Yet, the World Bank did not understand why it failed to win the hearts and minds of Tanzanians for its free market game plan.

This is not surprising.

More Zambians today are under the poverty line than before HIPC status was declared.

The failures of IMF/World Bank policies are not surprising. The IMF and WB were not meant to deal with the socio-political and economic challenges faced by developing nations.

They were born in 1944 with simple, laudable mandates -- to fund postwar reconstruction and development projects (the World Bank) and lend hard currency to nations with temporary balance-of-payments deficits (the IMF).

In the early 1980s, Third World nations, hemorrhaging after the fivefold increases in oil prices and a surge in dollar interest payments, brought their begging bowls to the IMF and World Bank, as Mr Biti is doing at the moment.

But instead of debt relief, they received Structural Assistance Plans listing an average of 114 'conditionalities' in return for loans.

The plan was always the same: remove trade barriers, sell national assets to foreign investors, slash social spending and make labour 'flexible' (or 'crush your unions').

Since 1985, in fifteen African nations the total number of illiterate people has risen and life expectancy fallen - which Britain attributes to "bad luck, (not) the international economic system."

The IMF and World Bank have called their loans by many names; viz, Structural Adjustment Programmes, Poverty Reduction Strategies, etc. These are all cosmetic terms masking the profit motive. They are simply loans and they attract interest. HIPC is not debt cancellation, but a way to help a country repay its debt and make more money for the IMF.

The IMF and WB are not charities or humanitarian agencies. They seek profit. Africa is the new focus of that profit motive because of its abundant mineral wealth.

When IMF chief Strauss-Kahn comes to Africa Africa, he is not on a 'holy pilgrimage' or on some humanitarian trip. He is a bank manager seeking to get repayment for loans plus the interest accrued. He is there to offer more loans.

It does not make economic sense to ask Zimbabwe to repay US$2 billion to get less than that in new loans. If the IMF is sincere about poverty reduction, it should simply relieve the countries of that debt, or give some long period moratorium.

What options for Africa, developing world?

Radical land reform is needed in Africa to feed its own people and produce that which it has a comparative advantage.

Cottage industries must be protected in order to promote competitiveness and employ the growing pool of the unemployed.

Foreign direct investment should be promoted, but only in so far as it benefits the host fiscus and ultimately uplift the country.

Global rules of engagement should be modified to allow "fair play" and to help suppliers of raw materials and primary commodities to thrive. Powerful players are simply not altruistic in their pledge to 'help Africa'.

This, among a host of other national, not foreign, policies should be pursued.

Mr Biti is simply wrong on declaring Zimbabwe a HIPC country. HIPC is neither a solution nor a remedy.

He is also wrong when he says, "We are going to be alone." Zimbabwe will never be alone given the vast mineral resources in that country. The world will never "leave us alone" and events of the last ten years have proved that.

Zimbabwe will always be engaged with the international community. But it has to do it in a way that is not parasitic as espoused by the IMF and other like-minded organisations and countries; or by the "Best Finance Minister in Africa".

Labels: DOMINIQUE STRAUSS-KAHN, IMF, NEOCOLONIALISM, TENDAI BITI

posted by MrK @ 8:32 PM