The Sunday Mail
Hon Patrick Chinamasa
Our discussions with the International Monetary Fund team have been very brutal and frank. We have had an excellent relationship in that interaction. This is how I think it should be. We have differences, but on the overall, we all agree on major issues.
What is expected is defining reality. This is exactly what I did when l moved to Treasury last year, defining reality in terms of where Zimbabwe sits globally and internally.
Otherwise I risk being a dreamer and poet, living in a world of my own. The reality I defined for Zimbabwe is that yes, the country is under sanctions, but probably even more importantly, it has a debt overhang.
But that reality should not be allowed to defeat the country. It is now left to us, as leaders of private sector governance, to craft strategies to circumvent those obstacles.
That is exactly what we have been doing over the past two years since I became head of the Ministry (Finance and Economic Development).
Some (obstacles) may appear insurmountable at first. However, we should always craft strategies that will eventually overcome or minimise negative impact on our economy.
Now, the first reality that I defined is the debt overhang.
That reality means over the past 15-20 years, we have not been playing our rightful part in the global economy.
We have not fully integrated in the global economy. But we have to and time is not on our side. We have already lost time.
The major obstacle to that reintegration has been debt.
I don’t always want to dwell on the negative and also pretend that reality is not there, as whatever I devise will not work.
The reality is that we have indebted almost everybody who has done business with us.
We undertook a land reform programme, which in my view was necessary to correct a historical imbalance.
And because of that, it invited sanctions and sanctions undermined our capacity to honour our obligations to our creditors.
So, the reality Treasury faces is that we owe money to South Korea, Japan, China, India, Kuwait, every country in Europe, Canada, Australia as well as the European Investment Bank, African Development Bank and the IMF.
That is the reality.
Now, if we dwell on that reality, we will not go anywhere.
We will just go in a vicious circle.
You must also always recognise that at the end of the day, everything is (in) the battle-lines of politics.
But we must find ways of even overcoming the politics.
Not over (as) an event, but over a period, over a process.
You must recognise that.
To get into a position where we reach accommodation with all people — whether political or economic accommodation — we must engage.
We have to engage, which is why I want to reaffirm Government’s commitment to re-engaging our creditors, both multi-lateral and bilateral.
Why are we re-engaging our creditors?
Those are the people who used to give us lines of credit. They were also the countries from where investors with equity capital came into our economy.
If we don’t (re-engage) we are shutting all avenues to our development.
So, it is very important that I reaffirm Government’s commitment to re-engage, and this is with the view to mobilising new capital.
What this economy needs is new money.
The burden Treasury faces is in legacy problems. If I didn’t have legacy problems, l would be flying by now.
We have to face that reality, I believe it’s not insurmountable. While we face that reality, while we are crafting strategies to deal with that reality, it doesn’t stop us doing whatever we feel is within our capacity to do.
It does not stop us doing exactly what we think we can without the re-engagement.
What is the endgame of this re-engagement?
The endgame is to clear our arrears.
It so happens that the reality of these multi-lateral institutions is that they don’t give you more money if you are in arrears.
True, like any organisation, they may divert or deviate from that.
No; depending on dual political interests over which we have no control as Zimbabwe.
It happens.
The considerations that the IMF will give Greece are not the same as those they will give us because Greece has very important dual political colleagues and friends in Europe.
But the reality is we have to meet so that we clear our arrears.
At the end of it, we hope, if engagement is successful, to be able to enjoy full benefits of our membership in these organisations.
Don’t forget, we are a shareholder in the African Development Bank, a major one by continental standards.
We are a shareholder in the World Bank and so on.
As a shareholder, we have certain rights and benefits.
We are not enjoying these because of the arrears that we need to clear.
So let’s be clear about the endgame.
The strategies that we have crafted to get to that endgame were to re-engage with the IMF.
I’m happy it’s now two years since I came in and we have been able to fulfil each of the targets (end of December 2014 and end of June this year).
The (review) report is positive.
I am very happy that (Welfare Services for War Veterans, Former Political Detainees and Restrictees) Minister Christopher Mutsvangwa gave a glimpse of what goes on in Cabinet.
I had not expected that he would wash our linen here, but I am very encouraged.
I have taken the opportunity to put permanently on the agenda of the Politburo — of which I am a member — a discussion of our economy.
We discussed the economy and the debates are as polarised as they can be in a political formation.
I welcome them because at the end of the day, I know there is no view which has not been put on the table and taken into account in arriving at the final path that we have to travel.
The targets under the Staff Monitored Programme are our targets and I dare any critic to tell us that what is in the targets we did not do with the IMF.
Sound macro-economic management is the goal and question of any Government.
If you are not managing your economy efficiently and effectively, it’s not right and I don’t think we should be apologetic for seeking to be sound managers of our economy.
One of the targets, basically, is to spend above a certain threshold of social expenditure.
The sort of things we are talking about are education and health and in that, we are doing very badly given our difficulties.
What would you criticise, if you agree that we are going to spend more?
We have had to clean up the financial services sector and enact structural changes.
What is the problem with dealing with non-performing loans and coming up with strategies to sort them out; to clean up the balances of commercial banks so that they are better able to lend?
So to the critics, if there are any, please let’s zero in on the policies.
Criticise me on the policies, tell me (about the ones) we are following and those you think we should not be doing.
Don’t politicise the discussion.
Let’s handle the merits of a policy and agree whether or not I’m wrong or you are right.
Our problem, essentially, is that of confidence. I am happy that two years later, I think we are doing well in that area considering the position we were in when I started.
Then, there was polarisation between Government and business.
We have now built bridges and speak with a collective voice.
That is how it should be.
In fact, the two cannot do without each other, they need each other.
We can mess up business big time if we are not correctly advised or made aware of its concerns.
It’s very important that that interaction continues and is advanced.
How do we hope to develop the economy when business is not talking to Government?
I am very happy with the relationship that we have had to build between business and Government.
One of the problems we have had to handle is the mindset, the hyperinflation mindset that thinks anything can happen without any effort, money can just drop into your pockets.
We don’t want a mindset which thinks there are short-cuts. It’s a process and we have to wait for it.
We have to put energies into it in order to get ourselves out of this situation.
Everything is under control.
We should not be hopeless and helpless.
I always tell colleagues that as far as I am concerned, I am much happier.
In fact, I sleep very well because once you have defined your reality and strategy and are implementing the strategy, what can stop it?
You monitor your strategy implementation, evaluate and change course where necessary.
So I don’t want us to be apologetic about building a track record of efficient management of our economy.
As part of confidence-building, I don’t know how many times I have said this: we run a multi-currency regime.
It’s a reality.
There is no point in wishing otherwise.
It came about because of lack of confidence and sometimes solutions could be easy if you have the confidence of our own people, not just international.
Who would dare any businessman here to start talking about bringing back the ZimDollar or our own currency?
I dared some of them who came to speak to me about it, saying, “Can you start the ball rolling?”
It evolves around issues of confidence and we have to accept, especially businesspeople, that the reality is that we have the US dollar and the economy has been appreciating.
The Rand, the currency of our biggest trading partner, is appreciating, and it is for this reason that we should aim at price correction.
We have been handling issues of the investment climate and the only outstanding one in my view, is giving guidelines on the indigenisation law.
There is a matter that (Reserve Bank of Zimbabwe Governor) Dr John Mangudya and the Youth, Indigenisation and Economic Empowerment Minister are working on.
There was mention of re-basing the economy.
I don’t know why this discussion is taking place. Certainly, it’s not one of my worries.
What I think is of concern to me is the rigidity of the labour market and I’m happy that with the recent reforms, labour market flexibility has been introduced.
I’m aware workers and employers are not happy, but where I sit in my neutral position, thinking about the economy, I’m very pleased about the reforms.
They serve and will promote growth.
They succeeded in bringing in flexibility while taking care of workers’ protection.
I know employers have been worrying too much about the retrospectivity. That’s a once-off thing and I don’t think you should cry too much.
I agree on the question of State enterprise reform. Of all the things that we have been doing, maybe we have not been focusing much attention on it.
There were too many things that needed to be done concurrently, but that is an issue we now need to zero in on and make sure State enterprises perform to expectation.
Currently, they are not making contributions.
If anything, much of my time is spent with parastatals coming for resources when in fact, it should be the other way around.
So, we need to address those issues.
It’s very important that we first come up with strategies and this is where we have been seeking the help of the World Bank, strategies on how to formalise the informal sector.
Agriculture is also very key.
It is the backbone.
In fact, were it not for agriculture, we could have been in deep economic crisis.
Our people are still rural-based, probably 75 percent rural.
They grow their own food.
This past year, the rain failed us, but, generally, the contribution of agriculture to our economy is very significant and it is here that we can make very good progress, especially in horticulture and right across the board.
This is an area where I would want to see more investment into the sector.
The other day, someone said to me (regarding engagement with the IMF): “You don’t know the IMF. It’s like a lady who is a flirt, encouraging a boy to make advances and when the boy makes advances, the flirt spurns those advances. . .”
I have not yet been traumatised because what we are doing is what we should be doing with or without the IMF.
For instance, you don’t need the IMF to tell you that if your revenue is US$100 and you spend US$85 paying workers, you have to act to address that.
You don’t need the IMF to tell you that if your banks are running non-performing loans, the sector can collapse.
That is the stage where we are with our relationship with the IMF.
If they are traumatising or intend to traumatise us, please alert me. Generally, our engagement with them has been very candid.
The conversation goes like this: we are in this engagement because we are in arrears.
If we were not in arrears with creditors, we wouldn’t have this Staff Monitored Programme. Our relationship would be limited to Article 4 consultations once a year.
We are in this situation because we are in debt, that is a fact.
What they then said is, “How are you going to pay? Your economy is in bad shape. What are you going to do about it to put it right?”
So, we came up with A,B,C — these are our measures.
We own them.
If, for instance, we have difficulties in meeting any of them, we tell them.
This year, because of the drought, some targets cannot be met.
So, we have to engage them, having to revise certain points. I want to emphasis that we cannot be isolated for too long.
We need to belong to the global economy.
It does not stop us in the meantime to look inward, being both outside and inside looking.
I believe much of the work should be done internally. We have resources that, if leveraged, can also help get us out of our situation.
We can leverage these resources in partnership with both domestic and foreign investors.
- Honourable Patrick Chinamasa is the Minister of Finance and Economic Development. This article was taken from remarks he made at the Economic Prospects for Zimbabwe and the Re-engagement Process Round Table Discussion in Harare on September 10, 2015.
