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IMF assessors fly to Harare as SA loan crunch looms
Karima Brown & Dumisani Muleya, Business Day (South Africa)
August 22, 2005

http://www.businessday.co.za/articles/article.aspx?ID=BD4A82211

Time is fast running out for Zimbabwe President Robert Mugabe to agree to the stiff conditions attached to SA’s proposed financial rescue package, with International Monetary Fund (IMF) officials arriving in the country today ahead of a September board meeting.

The IMF meeting will determine whether to expel SA’s northern neighbour for not honouring its $295m debt.

The IMF visit comes shortly after a meeting between Finance Minister Trevor Manuel and his Zimbabwean counterpart, Herbert Murerwa, last Wednesday as the two tried to avert the collapse of SA’s "in principle" agreement to grant Zimbabwe a financial lifeline.

Zimbabwean central bank governor Gideon Gono was in SA last Thursday to help finalise the bale-out. Reports suggested he met his South African counterpart Tito Mboweni as part of efforts to stop the deal from collapsing.

Sources in Harare and SA indicate the deal has been largely thrashed out and now awaits approval from Zimbabwe’s political principals. There are, however, indications that Mugabe is trying to get SA to soften its stiff conditions.

This seems unlikely in the light of Pretoria’s insistence that a "sustainable" solution is found.

South African government officials were initially at pains to avoid being seen to act like "big brother" and were aware of the need for the Zimbabweans not to lose face during the negotiations.

But President Thabo Mbeki has made it clear that Zimbabwe must embark on a set of sustainable economic and constitutional proposals that will ensure the country’s long-term recovery and avoid a repeat of the current crisis. SA is unlikely to forfeit its leverage, given the gravity of the economic crisis in Zimbabwe and the real possibility of its expulsion by the IMF.

SA’s loan conditions include constitutional reforms such as the repeal of repressive laws, freeing the media, dialogue on aspects of the constitution and restructuring the chaotic economic system. It is understood that the reform measures involve a broad range of players including business, labour civil society groups and political parties.

If Zimbabwe is expelled, it will be the first country to have been kicked out since 1954. The move would worsen its image as a failed and rogue state.

The South African government is keen to avoid Zimbabwe’s expulsion from the international lender and has continued to call for continued engagement with Zimbabwe from the international community. However, given the current economic meltdown and Mugabe’s recalcitrant stance, Zimbabwe’s expulsion could soon be a reality.

Zimbabwe’s Murerwa said the IMF would be coming for Article IV consultations with Mugabe’s government and a wide cross-section of Zimbabweans.

The IMF’s visit is standard practice ahead of its crucial decision and its directors will want to see evidence of some sort of economic recovery plan that will form the basis for continued financial aid to that country.

They are also likely to demand some sort of repayment plan of the loan and this could be the tipping factor that gets Mugabe to agree to SA’s conditions.

Meanwhile, the IMF visit today coincides with an already deepening economic crisis amid warnings of a possible stock market crash and a big fall in the value of the Zimbabwean dollar.

On Friday, the currency crashed 23%, to Z$24025,31 to the US dollar in the official market, signalling further tremors in the unstable foreign exchange market. In the parallel market, the exchange rate is US$1: Z$45000.

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