Recently there have been calls for Zimbabwe to seek debt forgiveness and try to access IMF and World Bank Highly Indebted Poor Country (HIPC) facilities.Whilst such calls may appear reasonable and justifiable Zimbabwe needs to think long and hard before throwing itself further into IMF and World Bank engineered structures and schemes.If not careful Zimbabwe could end up worse off by swallowing these Bretton Woods prescriptions.Zimbabwe must not seek debt forgiveness but rather debt re-scheduling and use its resources wisely like Diamonds and platinum to repay its debt.
This way the country will build credit line faciltities and move away from donor dependence syndrome which has become a challenge for most African nations.Zimbabwe's economic model must be driven by a vision to be strong and independent without relying on donors or lenders whether Chinese or Western.The difference is the same.They have their interests not Zimbabwe's.
Most Zimbabweans would remember ESAP popularly known as Extended Suffering for African People.This was the IMF and World Bank backed Economic Structural Adjustment Programme in the early 1990s.This programme was much publicized and implemented in a way that devastated many Zimbabwean industries such as textiles which suffered from market flooding with cheap Chinese goods and underpriced second hand clothes destroying Zimbabwe's industrial base.
The HIPC Initiative was launched in 1996 by the IMF and World Bank, with the aim of "ensuring that no poor country faces a debt burden it cannot manage.Assistance is conditional on the national governments of these countries meeting a range of economic management and performance targets." Since then, the international financial community, including multilateral organizations and governments have worked together to reduce to sustainable levels the external debt burdens of the most heavily indebted poor countries.
Many critics have attacked HIPC as a program designed by creditors to protect creditor interests, leaving countries with unsustainable debt burdens even upon reaching the decision point.This so because for a country to achieve HIPC status it has to meet several targets and some of these require adjustments which could result in social programmes suffering and unrealistic budget targets being imposed.Zimbabwe is a resource rich nation and should focus on properly accounting for its wealth and resources in a manner that creates wealth plus service its debt.
The focus on seeking debt forgiveness only will result in the country becoming donor dependent,weak and poor.As a matter or priority and national economic security Zimbabwe needs to embrace the Kimberly Process which can help the country handle its newly found diamond wealth.This wealth can then be wisely used to build a solid financial base and create jobs.
By late 2009, the HIPC program had identified 40 countries (29 of which are in Sub-Saharan Africa) as being potentially eligible to receive debt relief.Some of the countries include Ghana,Somalia and Ivory Coast.Some of the countries in this list have been classified as poor for a very long time.Despite subscribing to IMF and World Bank policies they remain poor and struggling.Which leads to the question can a country really succeed and develop using IMF and World Bank ideas and structures?In economic circles its a well known saying that never mis-manage your economy to such an extent that you ever end up needing the IMF or World Bank.
"In 2005, to help accelerate progress toward the United Nations Millennium Development Goals (MDGs), the HIPC Initiative was supplemented by the Multilateral Debt Relief Initiative (MDRI). The MDRI allows for 100 percent relief on eligible debts by three multilateral institutions-the IMF, the World Bank, and the African Development Fund (AfDF)-for countries completing the HIPC Initiative process."
For a country be considered for HIPC Initiative assistance, a country must fulfill the following four conditions:
A) be eligible to borrow from the World Bank's International Development Agency, which provides interest-free loans and grants to the world's poorest countries, and from the IMF's Extended Credit Facility, which provides loans to low-income countries at subsidized rates.
B) face an unsustainable debt burden that cannot be addressed through traditional debt relief mechanisms.
C) have established a track record of reform and sound policies through IMF- and World Bank supported programs
D) have developed a Poverty Reduction Strategy Paper (PRSP) through a broad-based participatory process in the country.
The HIPC is particularly not trusted in most poor and developing nations because the IMF and the World Bank do not cancel any debt until the completion point, leaving countries under the burden of their debt payments while they struggled to institute the suggested structural reforms. In addition the Economic Structural program conditions often undermined poverty-reduction efforts as they are insensitive to other poverty fighting measures and programs designed to combat such challenges as AIDS,Orphans,Provision of clean water and general measures to fight disease.
Since the Gideon Gono induced hyper inflation nightmare days Zimbabwe may become easy prey for Lenders such as the IMF and World Bank and join programs that are not well thought out.The key for Zimbabwe is to take stock of its resources and other assets such as human resources including exiled Zimbabweans to come up with a home grown recovery process whilst incorporating some of the ideas which may come from bodies like the IMF and the World Bank.The critical part is to avoid approaching these Institutions without our own plan.Zimbabwe should draw up the plan and then seek input from IMF and World Bank rather than the other way round.
This article appears as courtesy of GMRI Capital ( www.gmricapital.com) prepared for 3MG MEDIA
Gilbert Muponda is a Co-Founder of 3MG Media . He can be reached at;
Email: gilbert@3mgmedia.ca . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
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