The Sunday Mail
THE long-standing Western-imposed sanctions have fundamentally locked Zimbabwe out of the global financial system.
In particular, the enactment of the Zimbabwe Democracy and Economic Recovery Act (ZIDERA) by the United States in 2001 effectively blocked the country’s access to international credit markets.
ZIDERA highlighted how multilateral financial institutions, especially the World Bank and the International Monetary Fund (IMF), have been weaponised by the US and other Western countries.
In a highly globalised world, there is only so much that a country can do when it has been isolated from the global financial system.
The sanctions on Zimbabwe have forced her to operate on a hand-to-mouth basis.
Operating with limited financial resources, Zimbabwe has witnessed a build-up of external debt arrears, which has degraded the country’s credit worthiness, as the nation’s international financial risk profile escalated.
But that is exactly what the Western-imposed sanctions are meant to achieve.
And that is why Zimbabwe’s application to join the BRICS’ New Development Bank (NDB) is a game changer for the country.
The NDB is a multilateral financial institution established in 2015 by the BRICS countries — Brazil, Russia, India, China and South Africa — whose core purpose is to fund infrastructure and sustainable development projects in BRICS countries and other emerging market economies and developing countries.
Zimbabwe’s move to join NDB signifies the country’s re-entrance into the global financial system, albeit different from the one it was cut off from at the turn of the new millennium. It is arguably one of the biggest sanctions-busting moves that the country has taken over the past two decades.
According to the United Nations Conference on Trade and Development (UNCTAD), the BRICS now constitutes one of the world’s most important economic blocs, representing more than one quarter of the global gross domestic product (GDP), and 42 percent of the world’s population.
With the rise of the Global South and groupings such as BRICS and its institutions, the Western world (and its multilateral financial institutions) is no longer as significant an economic bloc as widely imagined.
Notwithstanding the negative impact of the sustained decline in long-term capital inflows, Zimbabwe has largely managed to cope with the effects of the sanctions.
Joining the NDB will allow the country to access international credit markets, opening up new channels of development co-operation.
This is particularly significant at this point in time, given Zimbabwe’s ongoing extensive and long-term infrastructure development programme.
Under the Second Republic, the country is targeting to become an upper middle-income society by 2030, which requires the delivery of infrastructure projects that support structural transformation of the economy, and drive productivity growth and job creation.
The Government has been financing a number of key infrastructure projects through Treasury budget appropriations.
According to the African Development Bank’s Zimbabwe Infrastructure Report (2019), the country requires an investment of US$3,3 billion per year to 2030 in order to restore its infrastructure.
Given these infrastructure funding requirements, there are significant limitations to the key projects that can be funded through the fiscus.
Zimbabwe still needs multilateral development finance, and becoming a member of the NDB will open that door.
The Second Republic has already shown that it puts funds to good use.
Zimbabwe is using its own funds to finance the rehabilitation of the Harare-Beitbridge Highway, which is an important trade route for the Southern African Development Community (SADC) region.
And, through bilateral funding from China, the country successfully rehabilitated Hwange Thermal Power Station Units 7 and 8, which have added 600 megawatts (MW) to the national grid, ending years of crippling load shedding.
At the peak of load shedding, both the welfare of Zimbabweans and the country’s industrial output were negatively affected. With efficient multilateral development finance, the country can accelerate its infrastructure development programme.
By joining the NDB, Zimbabwe will also be delinking itself from the vagaries of the US dollar-based global system, which are exemplified by the 2007–2008 global financial crisis.
Just this Wednesday, the US Federal Reserve increased interest rates by 25 basis points, pushing the country’s benchmark borrowing costs to the highest level in over two decades.
The continued upward review in US interest rates has slowed its economic growth, which could have global spillover effects.
There is no rational justification for the world to suffer from the US’ domestic problems and policies.
