US Ambassador Says Zimbabwe’s Failure to Access Loans Result of Arrears Not US Sanctions
Harare hopes that if it settles its arrears, it will seek IMF financial support for a medium-term reform program.
WASHINGTON — United States Ambassador to Zimbabwe Harry Thomas Jnr. says Washington is ready to engage Harare and dismissed claims that his country’s sanctions regime have hurt Zimbabwe’s economy. The country’s debt arrears to the three multi-laterals, the International Monetary Fund, World Bank and African Development Bank, currently stands at $1,8 billion. This is seen by economists as blocking new funding. As at the end of June 2015, Zimbabwe’s public and publicly-guaranteed debt stood at $8,4 billion. This comprises an external debt of $6,7 billion, representing about 47 percent of GDP, and domestic debt of $1,7 billion. Zimbabwe owes bilateral creditors $3, 5 billion including arrears, Paris Club $2,8 billion, non-Paris Club $709 million, multilateral creditors $2,57 billion while the Reserve Bank of Zimbabwe owes external creditors $587 million. As a first step toward normalizing relations with creditors, Zimbabwean authorities have developed a strategy for clearing arrears owed to International Financial Institutions. The plan was endorsed by creditors and development partners at a meeting on the sidelines of the 2015 annual meetings of the IMF and the World Bank in Lima, Peru. Harare hopes that if it settles its arrears, it will seek IMF financial support for a medium-term reform program, with a view of, thereafter, seeking debt treatment - debt reduction, loan restructuring or debt relief - with bilateral creditors. But Chido Munyati, an independent public affairs consultant writing in the Foreign Policy Journal, says it is not likely that the arrears clearance plan will succeed without the complete support of the U.S. because of the restrictive provisions under the Zimbabwe Democracy and Economic Recovery Act or ZDERA. The Act holds that until the U.S. president makes certain certifications -relating to good governance - “the Secretary of the Treasury shall instruct the United States executive director to each international financial institution to oppose and vote against (1) any extension by the institution of any loan, credit, or guarantee to the Government of Zimbabwe; (2) or any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any international financial institution." Munyati says, “Unlike the (Staff Monitored Programe) SMP, which is approved by the IMF’s management, a Fund-financial arrangement (new loans/budgetary support) requires the approval from the IMF Executive Board. The U.S. effectively has veto power on the IMF Executive Board—to approve or deny Fund-financial arrangements. Specifically, the U.S. holds 16.85 percent of the board’s total votes. By comparison, German, Japan, and the United Kingdom have a combined 15.81 percent of the board’s votes. The U.S. has similar controlling power in the World Bank.” Asked about this Thomas said it is still premature to discuss about new funding. “Let me be clear, Zimbabwe is not eligible for loans from the international financial institutions because as you know, it stopped paying before 1999 and that made Zimbabwe ineligible. And that has nothing to do with ZIDERA. We do encourage economic reform, we would like to see economic reform. We were very encouraged with our meetings in Lima (Peru), we’ll have to see what happens in May, but there is a long way to go before there will be any discussion of money and disbursement. He added that "we have to see as other members of these organizations what Zimbabwe’s complete plans are, how they intend to implement those plans and structure their reforms. So it’s premature to talk at this point, about new lending until we see what the government will do. We are encouraged by the fact that they want to do it, but now we have to see what they are going to do.” Ambassador Thomas says the United States government is not placing any conditions on Zimbabwe to lift the sanctions but is simply echoing the concerns of Zimbabweans who are yearning for democracy. But more worryingly for Zimbabwe, in January in a letter to Secretary of the Treasury Jack Lew, U.S. Senator Bob Corker (R-Tenn.), chairman of the Senate Foreign Relations Committee, urged the Obama administration to use U.S. influence to prevent new international lending to Zimbabwe absent meaningful progress by the government to restore the rule of law and improve human rights. “Without meaningful progress toward long awaited reforms by the Mugabe regime, new lending could significantly alter internal political dynamics and help entrench the very same individuals responsible for the country’s economic collapse and gross human rights violations,” wrote Corker in his letter to Secretary Lew. Responding Thomas said, “Well, that is what the Senate would like. Clearly, I work for the President of the United States who has made his position clear on the need for economic and governance reform, we are not going to get into a list or tit-for-tat, that will be counterproductive, but we would like to see government reform as well as economic reform.” The US ambassador also said he is working hard to promote trade between Harare and Washington’s business people The Sunday Mail newspaper recently accused the United States of crippling Harare’s economy by targeting banks dealing with Zimbabwe. But Ambassador Thomas says what has hurt Zimbabwe’s economy more is its failure to reform and deal with corruption not sanctions. International Crisis Group’s Southern Africa project director, Piers Pigou says Ambassador Thomas’s position on Harare is correct as Harare has not shown any willingness to reform. In February 1962, president John F. Kennedy proclaimed an embargo on trade between the United States and Cuba, in response to certain actions taken by the Cuban government, and directed the departments of commerce and the treasury to implement the embargo, which remains in place today. On April 11, 2015, presidents Barrack Obama and Raúl Castro shook hands at the summit of the Americas in panama, marking the first meeting between a U.S and Cuban head of state since the two countries severed their ties in 1961. The meeting came four months after the presidents announced their countries would restore diplomatic relations, and gave rise to president Obama’s March 2016 visit to Cuba, the first by a sitting president in over eighty-five years. But the question is why not Zimbabwe. Pigou says its comparing apples and oranges as America might have seen reforms happeninf in Havana and not Harare. David Monyae the Co-Director of the Confucius Institute at the University of Johannesburg says both Harare and Washington must work hard to find common ground. Zanu-PF chairman for the UK province, Nick Mangwana says Mr. Mugabe is targeted because he is a pan Africanist. But political analyst and crisis in Zimbabwe regional coordinator Joy Mabenge says Zimbabwe must embrace the rule of law. U.S. targeted sanctions apply to only 98 Zimbabwean individuals and 68 entities, mostly farms and legal entities owned by the 98 individuals. The United States implemented the targeted sanctions program in 2003 as a result of the alleged actions and policies of certain members of the Government of Zimbabwe and other persons undermining democratic institutions and processes in Zimbabwe. But Harare says sanctions were imposed because it embarked on a land reform program to address the colonial imbalance.