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International relations move from freezer to fridge
IRIN News
May 18, 2009

http://www.irinnews.org/report.aspx?ReportID=84436

A gradual defrosting of relations between Zimbabwe's unity government, Western nations and global institutions, combined with a financial mechanism designed to avoid donor money flowing through the hands of ZANU-PF, the previous ruling party, is gently prising open the door for assistance to the beleaguered country.

Western nations have cast a jaundiced eye on the unity government formed on 11 February 2009, in which President Robert Mugabe and his coterie have maintained the wealth of power, leading to London and Washington to withhold billions of dollars in assistance unless there was tangible political and economic reform.

However, analysts are viewing two events as possible harbingers of change: a visit by the International Monetary Fund (IMF) from 18 to 29 May could see the institution renew its relationship with Zimbabwe, and the imminent arrival of envoys from Britain, the former colonial power and one of Mugabe's staunchest critics.

Alex Vines, director of the Africa programme at Chatham House, a UK-based think-tank, told IRIN: "This means that the relations between the two countries [Britain and Zimbabwe] have been moved from the freezer to the fridge. The relationship is still chilled, but it's no longer frozen the way it has been for the past years."

Vines said Western assistance was far from a done deal, and a package to bail out Zimbabwe would be determined by the IMF and the British envoys. "Zimbabwe will have to meet certain benchmarks, in the form of human rights and economic reform, to satisfy London to release any funds. Also, I think the British government will scrutinise findings by the IMF team before it makes any decision."

The unity government has not had an easy journey. Mugabe's ZANU-PF has been accused of numerous violations of the power-sharing agreement, and on 18 May the main partner, the Movement for Democratic Change (MDC), called on the Southern African Development Community, the regional body that brokered the agreement, and the African Union, its guarantor, to intervene.

IMF resumes technical assistance

The IMF announced on 6 May that it would resume technical assistance to Zimbabwe, but would not release any financial aid until Harare settled its US$133 million arrears. In 2002 the institution adopted a declaration of non-cooperation with Zimbabwe because of its overdue financial obligations, and suspended all assistance.

An IMF official in Washington told IRIN a five-member delegation would assess Zimbabwe's tax policies, payments and banking systems, and governance issues. "We have seen willingness to reform from the new unity establishment, and that is why we are responding with this technical assistance."

The first signs of an apparent thaw in bilateral relations between Britain and Zimbabwe were seen at the inauguration of South African president Jacob Zuma in Pretoria on 22 April, where a meeting on the sidelines between Zimbabwe's Prime Minister, Morgan Tsvangirai, and Britain's minister for Africa, Mark Malloch-Brown, is believed to have been the catalyst.

Mugabe has consistently blamed Britain for Zimbabwe's economic woes - including hyperinflation, unemployment of up to 94 percent and having more than half the population on food aid - but Mugabe's strong role in the unity government has been an obstacle to monetary assistance and investment.

"Response to direct financial aid has not been good at all. It's only South Africa and China that have weighed in with US$35 million, but that's just a drop in the ocean. We need US$1 billion more to pay civil servants and meet other budgetary expenses, and that we can only do when we have direct funding," Zimbabwe's economic planning and investment promotion minister, Elton Mangoma, a member of the MDC, told IRIN.

"The treasury remains largely dry and government is struggling to get by, but we remain hopeful. We are particularly happy that our fellow African countries and institutions have managed to extend lines of credit amounting to US$1.2 billion to us ... slightly exceeding our initial target of US$1 billion," Mangoma said.

Creating donor trust

The credit line was secured from the African Development Bank (ABD), the Cairo-based African Export-Import Bank, and Botswana and South Africa. The unity government has appealed for US$8.3 billion to resuscitate the country.

Donor reticence is also caused by a lack of confidence that the money will reach its intended recipients, but this has been allayed by the Multi-Donor Trust Fund (MDTF), a vehicle established by the World Bank, Zimbabwe's finance ministry, the ADB and the UN Development Programme. ZANU-PF has criticised the fund as being driven by forces hostile to Zimbabwe.

Finance minister Tendai Biti, a member of the MDC, commented: "As lack of trust is an obstacle, we believe the MDTF is an appropriate means to mitigate donor risk. Instead of giving funds directly to government, donors put their funds in the trust, and the Ministry of Finance directs expenditure - but the MDTF still oversees it, oversees the work of the finance ministry too - so everyone is protected. This is a bridge measure until trust is restored,"

On 18 May the World Bank pledged a US$22 million grant to Zimbabwe, and it will also receive part of a US$1.4 billion Food Facility established by the European Commission and UN agencies. Seeds, fertilisers and training are to be provided to 150,000 vulnerable rural households, which could increase the cereal yield in the next agricultural season by 10 percent to 15 percent.

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