The IMF is ready to throw the Mugabe regime a lifeline. Bad idea
“RIGHT now we literally have nothing,” Zimbabwe’s finance minister told French radio. Patrick Chinamasa was touring European capitals this week begging for money from donors. The “we” he was referring to was presumably not President Robert Mugabe’s inner circle, who between them probably have enough money to pay off all of Zimbabwe’s arrears to the IMF. Rather, he meant the government of Zimbabwe, which is indeed broke.
In 2009 Mr Mugabe’s inept and murderous regime printed so much money that inflation topped 500 billion per cent at its peak. When no one would accept Zimbabwe dollars that did not even make good tissue paper, the government abandoned its own currency and adopted the American one instead. This worked well for a while, largely because the opposition won a share of power between 2009 and 2013. Economic policies improved dramatically and growth was a healthy 10% a year.
But then Mr Mugabe’s cronies rigged elections in 2013 and took back full control of the country. They celebrated by doubling the size of the civil service. After three years of misrule and dazzling corruption, the treasury is bare again. Government employees have not been paid for weeks. Soldiers and police are restless. Some are helping themselves: there are now more than 20 police roadblocks shaking down tourists between the country’s main crossing-point from South Africa and Victoria Falls, its biggest attraction. This week civil servants took to the streets, and protests have broken out across the country.
The government cannot print money any more, and commercial bankers would rather be buried in a fire-ants’ nest than lend it any. So Mr Chinamasa is asking Western taxpayers to chip in. As The Economist went to press, he was hoping to finalise a deal to borrow about $1 billion to pay off Zimbabwe’s arrears to the World Bank, the IMF and the African Development Bank, which in turn could then start lending to Zimbabwe again.
Western governments worry that if they let Zimbabwe’s economy collapse, it will cause regional chaos. Far better, some argue, to stump up some cash and thereby strengthen the hand of “reformers” within the ruling party, ZANU-PF, such as Mr Chinamasa. This idea has the backing of the staff and board of the IMF, who say they are impressed by what they have seen so far of Zimbabwe’s economic reforms. Staff at the IMF think that if Zimbabwe gets some cash and speeds up reforms then its economy could leap ahead by about 8% a year. Without this it would bump along, they reckon, at about 4%.
Many observers think this is naive: that the government has misled them both about the true state of the economy and its own willingness to adopt tough reforms. “The IMF is being taken for a ride,” says Tony Hawkins, a Zimbabwean economist, just as they were “in 1982, 1991 and 1997”.
After talking to the government, the IMF estimates that Zimbabwe’s economy has grown slowly but steadily since 2013 and is now about 7% bigger than it was then. Yet this is hard to square with other numbers coming out of Zimbabwe. Take beer sales. Delta, a brewer that sells 98% of the lager in Zimbabwe, now sells about 30% less than it did in 2012, despite having cut the price several times (see chart). It seems unlikely that this is because ordinary Zimbabwean drinkers have traded up to champagne.
The government does not provide anything like timely employment figures (it last checked in 2014), but one proxy comes from the National Social Security Authority, which collects payroll taxes. Last year it took in 7% less revenue than in 2014. Tendai Biti, an opposition politician who served as Mr Chinamasa’s predecessor in the finance ministry between 2009 and 2013, reckons that the economy may be as much as 30% smaller than the official estimates. He also thinks the government is running much larger deficits than it claims (up to a colossal 12% of GDP), by paying civil servants late and not disclosing all of its liabilities. Mr Chinamasa says this is a lie.
The IMF says the Zimbabwean authorities have “met their commitments” under an IMF staff-monitored programme. But these “commitments” consist mostly of promising to enact reforms, such as curbing public spending and making procurement more transparent, rather than actually doing so. Shortly after the IMF’s board praised Zimbabwe’s progress, the central bank shocked everyone by saying it planned to print new notes, “backed” by a $200m loan, to ease a shortage of hard currency. With a straight face, Mr Chinamasa told the BBC that paying exporters in funny money would incentivise them.
History teaches that aid money cannot buy reform unless the recipient government actually believes in it. Does that apply to Mr Mugabe’s regime? These are the same people who have been in charge of the country, alone or in coalition, for 36 years. Their policies have included grabbing white-owned commercial farms (the main source of export earnings) and giving them to cronies, and threatening to seize half of all companies owned by white Zimbabweans and foreigners (who seem reluctant to invest despite Mr Chinamasa’s assurance that their money is welcome).
By Mr Mugabe’s own admission, $15 billion has been stolen from the country’s diamond mines in the past seven years. Global Witness, a watchdog, accuses ruling-party bigwigs of large-scale diamond looting. Mr Chinamasa says Zimbabwe’s economic woes are all the fault of Britain and America.
The last time the Mugabe regime ran out of money, it lost an election and ended up sharing power. This time, donors risk helping it prolong its misrule.