Re: [A-List] Zimbabwe: whither the IMF?

["Patrick Bond" <bond.p@xxxxxxxxxxxxxx>]

Hi comrades, sorry, just got this (I've been in Tanzania at health conferences, and then, ironically, down with a tummy bug). Mac put it out on Socialist Register list so I could read it from my home computer yesterday, and this was reply below the ***

>>> michael.keaney@xxxxxx 11/20/02 05:13PM >>>
I'd appreciate Patrick Bond's thoughts on this. Despite what we know about
certain high profile expulsions of foreign journalists and the overtly
hands-on approach to news management by the government, the appearance of
this article is interesting not least for its criticisms of past government
dalliances with the IMF and its apportionment of responsibility for present
economic difficulties. Who is Eric Bloch and why is the Zimbabwe Independent
publishing him?

***

Once again, hang on there my friend. Zim's not what it seems from such a
distance.

----- Original Message -----
From: "Macdonald Stainsby" <mstainsby@xxxxxx>

> I got this gem off of the A-list, a beaut of a bourgeois attack on
> Mugabe/Zanu-pf for repudiating the IMF. The vitriol makes me think Mugabe
must
> be serious for this guy to have such absolute racist hatred for Zim.

Sorry comrade, if you think Mugabe's serious, come around for a visit. When
I was there last month, the newspapers had the IMF resident representative
announcing that IMF loans could resume in 2003 if conditions were met. In
2001 Mugabe also said he'd be happy for new IMF loans. It's just a matter of
time before some sort of elite deal resurrects Zim's int'l credit rating, no
doubt mediated by Mbeki's failing Nepad gambit.

Just FYI, the last IMF loan to Zim, in 1999, gives you a sense of how
bizarre the dance is. The
following 'grafs are from a book, "Zimbabwe's Plunge: Exhausted Nationalism,
Neoliberalism and the Search for Social Justice", which I did with Simba
Manyanya (the second edition will be launched in Harare next Thursday):

The IMF sent a high-level team to negotiate the disbursement of a US$53
million loan (which in turn would release another US$800 million from other
lenders). There was a confused flurry in early 1999, when Mugabe sought
funding elsewhere than the IMF.  The IMF's Zimbabwe objectives were
straightforward: reversal of both the luxury import tax and price controls
on staple foods. According to Michael Nowak, the IMF official controlling a
US$53 million loan tranche, 'There are two issues outstanding and these have
stopped the IMF from making the standby credit available to the country.
These issues are, one, we want the government to reduce the tariffs slapped
on luxury goods last September, and secondly, we also want the government to
give us a clear timetable as to when and how they will remove the price
controls they have imposed on some goods.'
    Later in 1999, the IMF agreed to increase the loan amount to US$200
million. But according to an IMF official, yet more conditions emerged,
namely, access to classified Democratic Republic of Congo war information
and a commitment to pay new war expenditure from the existing budget: 'The
Zimbabweans felt offended, shocked, but they all the same agreed to give us
the information, we got all the clarification we wanted. They had no
choice... We have had assurances [that] if there is budgetary overspending,
there will be cuts in other budget sectors.'  A final deal arranged in
August 1999 also compelled the Zimbabwe Reserve Bank to restore foreign
currency accounts to local corporations. The deal soon fell apart, however,
when Mugabe's government violated several provisions.

As for Eric Bloch, he's a widely derided local accountant whose writing
style gives you a sense of his intellectual constipation. I'll pop some
rebuttals in and give you a taste of my last debate with Bloch at the end...

> Zim's Love/Hate Relationship with IMF
> By Eric Bloch
> Ever since the International Monetary Fund (IMF) discontinued its funding
> support of Zimbabwe, it has been a pronounced target for scathing verbal
> attacks by the Zimbabwean governmental hierarchy, its bellicose media
which
> unhesitatingly abuses the fundamental precepts of journalistic ethic in
> order to satisfy its masters, and those duped by such attacks into
believing
> that the IMF is all that its loud-mouthed critics allege it to be.

Actually, those attacks have been underway in Zim since 1982. I'll be happy
to dig them out if you want, because this a part of was my PhD research,
showing how the nationalist-populist 'talk-left act-right' tendency emanated
from the very early sell-out of the Zim liberation ideals (available in a
1998 book, "Uneven Zimbabwe: A Study of Finance, Development and
Underdevelopment").

> Almost immediately after Zimbabwe's Independence, the IMF was forthcoming
> with considerable financial assistance for the young, new State that had a
> desperate need to develop its infrastructure, rebuild and grow the economy
> and source volumes of imports of capital and consumable goods. Much of the
> funding flowed from the IMF and, possibly of greater importance, the fact
> that Zimbabwe had a credible status with the IMF assuring it of public and
> private sector loan funding from international monetary organisations, and
> of vast aid from donor states.

This put Zim into massive debt early on, with the IMF saying that debt
payments would be 4% of export earnings when in reality they soared to 35%
by 1987.

> Concurrently, the IMF, the World Bank and others, responding to requests
> from Zimbabwe, gave advice as to how Zimbabwe could most advantageously
and
> expeditiously develop and strengthen its economy. Zimbabwe proved itself
> very willing to accept those advices - when they accorded with the desires
> of Zimbabwe's government - and especially so when they were accompanied
with
> monetary largesse.

Virtually all the advice given was rancid and led to failures. A fairly
comprehensive survey of all the sectoral and macroeconomic loans can be
found in "Uneven Zimbabwe."

> Thus, when the IMF advised Zimbabwe on a programme for economic structural
> adjustment, and provided much funding to facilitate and support the
> programme, Zimbabwe readily implemented those facets of the programme
(which
> became known as Esap) which appealed to it, but either ignored the
elements
> of the programme which were counter to the ideologies, economic
perceptions
> and misconceptions, and the vested interests of those in power in
Zimbabwe,
> or at best implemented the measures half-heartedly.

No, the ESAP measures were implemented whole-heartedly, and the WB responded
in 1995 by rewarding Zim with its highest rating for these programmes:
'highly satisfactory'.

> As a result, the first three years of Esap were a marked non-event,
> compounded by adverse climatic conditions. Belatedly, in 1994, the
programme
> was pursued with somewhat greater commitment and vigour, resulting in some
> significant economic advances over the following three years. However, the
> liberalised, deregulated economy did not conform with the political and
> other aspirations of Zimbabwe's masters.

For corrections on this chronology, see below.

> Esap represented freedom for the economy, but a straitjacket for the
> Establishment. Eventually the authorities could bear the constraints no
> more. They burst through the shackles that Esap represented to them (but
not
> to the economy), and progressively reversed all that Esap had achieved.

Esap failed to deliver the goods in all respects, so in late 1997 with
social tensions rising, Mugabe started his zigzagging.

> As the economic gains were increasingly reversed, as economic decline
> accelerated, it was necessary to divert any possible criticism and blame,
> and rapidly the IMF became a target. After all, Esap was founded upon
> economic policies strongly advocated by the IMF, and it was essential for
> the populace to be misled into believing that the economic recession was
the
> fault of Esap, which the state had therefore discontinued, in the alleged
> best interest of Zimbabwe and its people.

It's true that Mugabe looks for scapegoats, including the IMF.

> In castigating Esap, instead of itself, government successfully convinced
> many that the ills of the economy were not due to fault on its part, but
to
> that programme which it alleged had been imposed upon Zimbabwe by the IMF.
> And then, the economy continued to worsen, despite repeated assurances by
> government that its actions would soon restore well-being (after all, was
it
> not that "economy is the land, and land is the economy"?).

The economy worsened because Zim had become so terribly dependent upon
speculative financial and commercial circuits of capital, having
deindustrialised by following WB/IMF advice in the early 1990s. The
derigiste zigzagging response from 1997-present (characterised by even more
venal kinds of parasitical accumulation by Mugabe's cronies) is, naturally,
no way to deal with a capitalist crisis.

> More and more victims to be the brunt of governmental verbal assault had
to
> be identified as the culprits for Zimbabwe's woes. Hence Britain in
general
> and Tony Blair in particular, the USA, Canada, Australia, New Zealand, the
> European Union, whites, commercial farmers, industrialists, political
> opponents and numerous others were repeatedly accused of conspiring to
bring
> Zimbabwe's economy to its knees. But throughout, the IMF was identified as
a
> key villain, and more intensively so once it ceased to provide Zimbabwe of
> critically needed foreign exchange.

In reality, the IMF/WB and some commercial banks were sucking much more
forex out of Zim than they were investing. In 1998, the last year Mugabe
paid his full debt to foreign creditors, it amounted to 38% of export
earnings (the third highest in the world, after Brazil and Burundi).

> The fact that Zimbabwe was in default in servicing prior debt was not
> considered by government to be of significance. Zimbabwe is now indebted
to
> the IMF for US$153,4 million (which, at official exchange rates, amounts
to
> approximately $8,4 billion and, at prevailing parallel market rates, to
> about $153 billion).
> As recently as eight days ago, a state controlled daily newspaper was
> emblazoned with a headline pronouncing: "IMF, donors destroying democracy
in
> Third World". This form of crass attack upon the IMF has become an almost
> daily diatribe of vitriol.
> In practice, it invariably is a matter of "the pot calling the kettle
> black". It was President Franklin D Roosevelt who, in an address to the
> United States Congress in 1941, suggested that the pillars of democracy
are
> four freedoms. "The first is freedom of speech and expression .... The
> second is freedom of every person to worship God in his own way ... The
> third is freedom from want ..... The fourth is freedom from fear ....".
>
> Of these four freedoms, only the second prevails in Zimbabwe. Freedom of
> speech only exists selectively, government having enacted draconian
> legislation to curb free speech, unless such speech is acceptable to, or
> emanates from, government and the ruling party. The third freedom, being
> from want, is almost non-existent in Zimbabwe, with more than 80% living
in
> abject poverty. Millions are experiencing the pangs of hunger.
>
> Many are the sufferers of malnutrition. The causes are incontrovertibly
the
> reversal of the economic policies which stimulated the economy's recovery
> and growth from 1994 to 1997, that reversal being at the instance of
> government, and the disastrous mismanagement of Zimbabwe's immense
> agricultural resource by an ill-conceived, grossly inept and markedly
> unjust, agrarian reform programme, also at the instance of government,
> whereas a viable, practical, beneficial, internationally-supported
agrarian
> programme could readily have been pursued, except that such a programme
was
> not politically palatable to the ruling party.
>
> And the fourth freedom is also almost non-existent in the Zimbabwe of the
> 21st Century. Fear abounds. Fear of starvation, fear of the alleged
> guardians of law and order, fear of other arms of government such as the
> CIO, fear of war veterans, and fear of many others who are clearly immune
to
> the prescriptions of law!
>
> So, far from the IMF destroying democracy, it is the actions of some of
> those in power in the Third World, and certainly so in Zimbabwe. (The
latest
> example of erosion of democracy by the state is the contemplated
legislation
> that executive mayors not be elected by those they are to serve, but be
> appointed by Government!)
>
> Amazingly, however, on the same day as that attack upon the IMF was
printed,
> the Minister of Finance and Economic Development reportedly stated, in an
> interview with an independent newspaper, that a "task force" is drawing up
a
> macro-economic policy to be presented to the IMF and that talks with the
IMF
> will be opened as soon as that policy framework is complete.
>
> He is quoted as saying that "we are cognisant of the fact that we cannot
go
> it alone without international partners" and that "Zimbabwe still values
its
> IMF membership". He acknowledged that the IMF recently signalled that it
was
> prepared to bail out Zimbabwe from its economic quagmire, although he also
> said that "government wants first to steer the economy to a sustainable
path
> before seeking assistance from the IMF".

These statements reflect the *real* power relations: i.e., the inexorable
relations between an opportunistic exhausted nationalist party and
international financiers who know that the renewed sell-out is just around
the rhetorical corner. No surprise. Fanon wrote about this problem 41 years
ago.

> These statements fly in the face of oft-repeated contentions by many in
high
> office in Zimbabwe that "Zimbabwe can go it alone - Zimbabwe does not need
> the IMF or anyone else". Perhaps belatedly an element of reality is
setting
> in and eclipsing the delusions that Zimbabwe does not need others, save
> perhaps for those who are allegedly its friends, but whose friendship is
> linked to their own enrichment at Zimbabwe's expense. The minister's
> statements, deserving of much commendation and very courageous in the
> context of being the opposite to the enunciation of others in authority,
are
> the first, very tentative, indications of a possible transformation of
> Zimbabwean attitude to the IMF and, therefore, to restoration of a
> constructive economic environment.

Extracted from "Zimbabwe's Plunge", here's a summary of a debate I had in
the main Zim newspaper in Feb 2001 (endnotes with more details available):

Eric Bloch defended that failed strategy on grounds that, 'Esap was, to a
very great degree, implemented only as a matter of lip-service. Government
had no substantive commitment to, or conviction in, Esap and therefore only
implemented the programme partially. Patients who take prescribed medication
erratically, inadequately and in disregard for the prescription directions,
rarely recover... It is government which alienated IMF support, and also
that of most international monetary organisations, the support of donor
nations, and the support of aid agencies.'
    It may be self-satisfying to say, 'Washington was right but Zanu didn't
implement Esap.' Yet as noted in Chapter Two, not only did the World Bank
give Esap its highest mark in 1995.  The same year, a rather more
pro-government Bloch was celebrating 'significant reductions in direct
taxation, the liberalisation of trade and virtual elimination of import
controls with a consequential elimination of most shortages, the immense
relaxations of exchange controls' and other 'indicators of the achievements
of Esap to date.'  Presumably, the Zimbabwe elites' 1990s splurge on luxury
good imports and successful expatriation of Rhodesian-era capital was real,
not just 'lip-service.'
    The revisionist Bloch argued that an important exonerating factor for
neoliberalism was 'that Zimbabwe's economy was in an appalling state and a
horrific mess before Esap was embarked upon. It was the devastatingly
shattered state of the economy which motivated government to consider Esap
in the first instance.'  The concluding section of Chapter Two offers
documentation to the effect that according to every single economic
variable, Zimbabwe performed far better before Esap--and although mired in
stagnation borne of the 1970s overaccumulation crisis, was nowhere near
'devastatingly shattered'--than it has since. Upon receipt of this
information,  Bloch revised again, insisting that, 'only two relatively
progressive economic growth years occurred, being 1994 and 1995, when
government belatedly developed some commitment to Esap. In the first three
years, Esap was embarked upon most half-heartedly, with consequential
inadequate contribution to economic growth and moreover, Zimbabwe was
afflicted in 1991-92 with the worst ever drought that it had experienced.'
    What, then, was Esap's record prior to the 1991-92 drought, which
formally began when the rainy season failed (November 1991)? The policy was,
from early 1991, implemented rapidly as trade and finance were liberalised,
monetary policy was tightened, interest rates soared, the currency was
devalued by 35%, and key price controls were dropped. Yet according to the
ZCTU, 'Exports fell by over 3% in 1991 before any impact of the drought
could be felt, whereas in the comparable drought year of 1987 they had
actually risen.'  Inflation began to roar by mid-1991, quickly doubling
average 1980s levels. IMF/WB teams were by then running all over Harare, and
on September 5 persuaded the Reserve Bank to let short-term interest rates
soar from 27.5% to 44%. Immediate results included a massive credit crunch
(e.g. no home mortgages were available), a sustained property market
downturn, disastrous pension fund returns, major corporate financial crises,
and a sudden 30% crash of the Zimbabwe Stock Exchange. All this happened
before the onset of the 1991-92 drought, and because of Esap.