Sunday, September 28, 2008

Zimbabwe News Update: ZANU-PF Annual Conference Set for Bindura; China Opposes Meddling in Internal Affairs; The Global Economic Crisis, etc.

Zanu-PF national annual conference set for Bindura

Herald Reporter

THE ZANU-PF National Annual People’s Conference will this year be held in Bindura, Mashonaland Central Province.

Mashonaland Central Zanu-PF provincial chairman Cde Chen Chimutengwende said the party leadership in the province had started preparations in earnest for the event that will be held at Bindura University of Science Education.

Cde Chimutengwende said the province had already put in place committees to spearhead the preparations.

"The conference will be held at Bindura University from the end of November to the beginning of December.

"The province has set up two committees — fundraising and transport and welfare — to ensure adequate preparation for the event.

"The fundraising committee will be headed by the Deputy Minister for Youth and Employment Creation, Cde Saviour Kasukuwere," he said.

Vice President Cde Joice Mujuru will be guest of honour at a fundraising event at Mazowe Hotel today.

Bindura was due to host the conference last year but it was moved to Harare when it was upgraded to a special congress to enable the party to discuss and choose its presidential candidate for the March 29 harmonised elections.

Provincial fundraising committees have been tasked to raise at least $2 billion each while the national fundraising committee would chip in with $30 billion.

President blasts perpetrators of genocide in Iraq, Afghanistan


PRESIDENT Mugabe has blasted Western countries for perpetrating genocide in Iraq and Afghanistan saying such countries had no moral ground to point fingers at Zimbabwe.

According to the Opinion Research Business, an independent organisation, an estimated one million Iraqis — mainly unarmed women and children — have perished at the hands of US troops since the illegal invasion five years ago.

The President, who was delivering his address to the 63rd Session of the UN General Assembly in New York, said the Office of the Secretary-General should be used impartially and not for the furtherance of the interests of powerful nations like the US and Britain.

Since Zimbabwe’s stand-off with London began at the turn of the millennium, Britain and the United States have tried to have Zimbabwe on the agenda of the Security Council as a prelude to a military invasion.

"Not long ago, some permanent members of the Security Council sought to invoke Chapter VII of the UN Charter so its weight of sanctions and other measures could be applied against my small country which by any stretch of imagination is no threat to international peace and security," he said.

He asked: "What insanity is this that has afflicted some world leaders? Should the sacred document, the UN Charter, be allowed to suffer such undeserved emasculation and disgraceful abuse?"

"By the way, those who falsely accuse us of these violations are themselves international perpetrators of genocide, acts of aggression and mass destruction," said the President in his speech.

"The masses of innocent men, women and children who have perished in their thousands in Iraq surely demand retribution and vengeance. Who shall heed their cry?" President Mugabe asked.

"Who shall heed their cry? Surely, those who invaded Iraq under false pretences and on the strength of contrived lies and in blatant violation of the Charter and international law must be made liable for them."

The President called on the Secretariat to discharge its role with "sensitivity and neutrality" and "serve all member states without fear or favour".

The Security Council, he said, should to act "impartially, objectively and justly" and "within its mandate".

The President slammed US plans to impose further sanctions against Zimbabwe through the UN Security Council, and praised Russia and China for blocking the move.

"Zimbabwe does derive solace from the fact that there are some permanent members of the Security Council who have taken a principled stand in defending the Charter."

China against foreign meddling in Zim affairs

Herald Reporter

CHINA will continue to oppose any foreign interference in Zimbabwe’s internal affairs as the country has capacity to resolve its problems, the Chinese ambassador to Zimbabwe has said.

Delivering a lecture on Chinese foreign and defence policy at the Zimbabwe Staff College yesterday, Ambassador Yuan Nansheng said China was behind the idea of South-South co-operation and North-South dialogue and would explore ways of promoting mutual co-operation with African countries.

"China respects the choices made by Zimbabweans and is willing to take a constructive role in solving the country’s political and economic problems, improving people’s livelihoods and assisting in rebuilding efforts.

"We are supportive of the thinking that African problems should be resolved by Africans. The international community should avoid adopting actions that could have negative impacts on the atmosphere of dialogue," he said.

Ambassador Yuan said continued sanctions on Zimbabwe did not promote dialogue but would lead to further deterioration of the situation in the country.

"All in all, Zimbabweans deserve better than sanctions. It has been proven that China’s vetoing of the resolution (to slap Zimbabwe with sanctions) is absolutely correct.

Zimbabwean people are now on their way to unlock the political stalemate and revive the economy," he said.

The ambassador said as strategic partners, China was working with Africa and making innovative efforts to widen Sino-Africa co-operation on the basis of the forum on Africa-China co-operation.

"China shares the desire of the African countries to maintain independence and sovereignty and is supporting development that suits their particular conditions and resolve own problems.

Sadc values peace, stability: Sekeramayi

Herald Reporter

THE Sadc region attaches immense importance to training programmes that promote regional peace, unity and stability as well as conscientise its forces on armed conflicts, a Government minister has said.

Officiating at the graduation of Sadc forces at the end of a one-week course on International Humanitarian Law in Harare yesterday, the Minister of Defence, Cde Sydney Sekeramayi, said remarkable progress had been made in promoting the integration of IHL in the operations of regional defence forces.

"It is hoped that such concerted and noble training efforts will foster regional peace, unity and stability as the course was tailored to prevent violations of the law of armed conflict by protecting civilians, victims of war and their property as enshrined in international law."

He said regional stability and unity were critical elements for socio-economic development.

Speaking at the same occasion, the Commandant of the Sadc Regional Peacekeeping and Training Centre, Colonel Gaudance Milanzi, acknowledged the support the centre received from the Ministry of Defence in including International Humanitarian Law in training Zimbabwe Defence Forces members.

"We hope our training partner, the International Red Cross and Red Crescent (Society), will also consider implementing your other call to make this programme an annual event in future and, if possible, run two programmes every year," he said.

IRCRC regional head Mr Thomas Merkelbach said the presence of 13 out of 15 member states at the workshop was testimony to the importance the region placed on regional integration of the law of armed conflict in their doctrine, training and military justice systems.

"We hope that this evident enthusiasm for integration is translated into the structure brigade as its capacity to respond to the security needs of the region and the continent," he said.

The course brought together 14 senior military and police officers from 13 Sadc member states.

Unfolding global financial crisis

By Moses Stanley in Washington DC, USA
Courtesy of the Zimbabwe Sunday Mail

THE past two to three decades have seen the world economy being "regimented" onto a "Washington Consensus" that macro-economic and financial stability had to come only through the unfettered liberties of free market forces.

Under this Washington Consensus, which was vehemently propelled under the vantage opinion-making trajectories of the International Monetary Fund (IMF), the USA Treasury Department, as well as the USA Central Bank, The Fed, it was very bad economics and deep financial mis-management for Central Banks and Government Treasury Departments to prop up failed financial institutions using the public purse.

Stated explicitly, the Washington Consensus has until very recently, been that Central Banks and government treasury departments must allow institutions to collapse if such is the dictate of market forces.

The major preachers of this pro-market Consensus, which doctrine today stands as an embarrassment to its proponents, have, of course, been the IMF, who went at length in castigating Central Banks and countries that engaged in quasi-fiscal operations meant to rescue strategic institutions and key sectors of the economy.

The IMF on Zimbabwe

In their 2004 Article IV Consultations report on the actions by the Reserve Bank of Zimbabwe when it created a life-boat fund for the then troubled institutions, the IMF chided Zimbabwe’s Central Bank saying, ". . . the liquidity support provided was large and dear, weakening monetary control and potentially worsening the underlying problems. A few other banks continued to have liquidity problems and appropriate mechanism needed to be put in place to deal with them through recapitalisation or closure".

In yet another publication to the World, the IMF, in a Working Paper released on April 25, 2007, stated that "The Reserve Bank of Zimbabwe has also pumped money into collapsed financial institutions under a financial sector restructuring . . . ", arguing that it was wrong to do so.

The Washington Consensus also had religious backing in Europe. In an article entitled "Bank of England warns against bailing out struggling Banks" by Carter Dougherty, the Bank of England (UK’s Central Bank) criticised other Central Banks for injecting cash into the financial system to help stabilise credit markets, saying that such a policy amounted to a bail out of investors who would have made bad decisions.

Bolstering this view the Chief of UK’s Central Bank, Governor Mervin King once wrote.

"The provision of such liquidity undermines the efficient pricing of risk, providing ex-post insurance for risky behaviour. That encourages excessive risk-taking and sows the seeds of a future crisis." (Bank of England Website).

Confronted with an acute economic and financial crisis, the Reserve Bank of Zimbabwe successfully implemented a financial sector stabilisation programme in 2004, that entailed the advancement of loans to banks that faced transitory liquidity problems, as well as amalgamation of those which showed systemic solvency weaknesses.

Over the period 2004 to 2008, Zimbabwe confronted an economic crisis, itself accentuated by the imposition of sanctions on the country by most of the western countries.

Over and above the handicap of the sanctions, Zimbabwe was not spared from the global food crisis, aggravated by recurrent swings of droughts and floods. Also having gone through a historic Land Reform Programme, Zimbabwe needed to revitalise its agricultural sector through interventions that capacitated farmers. Faced with these real life situations, the Reserve Bank of Zimbabwe implemented the following series of policies, all of which met with loud condemnation from the IMF and the generality of the proponents of the Washington Consensus:

-Advanced secured lending to troubled banks, followed by their amalgamation into stronger institutions;

-Advanced concessional loans to resettled farmers to enable them to buy inputs, such as seeds, fertilisers, agro-chemicals and fuel for tillage in pursuit of the food security objective;

-Capacitated farmers through a nation-wide Farm Mechanisation Programme under which the Central Bank provided tractors, planters, combine harvesters, ploughs, disc harrows and many other implements to farmers through a stand alone private company (Agency) owned by the Central Bank;

-Provided funding for the construction of dams and the development of irrigation systems which would in future serve as buffers against droughts. This intervention was done in view of the absolute stoppage of donor funding;

-Provided financial support to manufacturers of basic commodities to sustain higher capacity utilisation levels; and

-Several other tailor-made interventions with a structural focus on unlocking the supply side of the economy.

All these innovations were, however, summarily condemned by the IMF as "bad economics", as they did not respect the hand of unfettered market forces and the orthodoxy of central banking where only interest rates and money supply control ought to shape the diary of Reserve Bank officialdom.

This vilification of the Reserve Bank of Zimbabwe has, however, recently come under vivid acid test in the face of the contemporary global financial turmoil, itself germinated and bred in the USA.

Facts on what the USA and the UK have and are doing

It is a fact that when confronted with the heart-splitting catastrophe of the September 11 terrorist attacks, the USA Central Bank, the Fed, injected billions of dollars to prop up their money and capital markets.

It is also a fact that when Hurricanes Katrina and Rita struck the USA in 2005, the USA Fed and Treasury provided a recovery life boat and injected yet another dose of liquidity in the financial system, through Treasury cheques and transfers into people’s accounts.

Recently, when the USA housing market came under unprecedented stress, again the Federal Reserve Bank pumped in hundreds of billions of dollars into the mortgage market to try and save the day.

On December 12, 2007, for instance, the Bank of Canada, the Bank of England, the European Central Bank, the USA Federal Reserve and the Swiss National Bank announced what were "out of the box" and unorthodox measures to address elevated pressures they saw in their financial markets.

At the centre of these measures was the creation and introduction by the American Central Bank what they called a "Term Auction Facility (TAF) Programme" which in its purest form was tantamount to soft loans into the financial system to the tune of US$20 billion, which was rolled over back into the market more than four times, implying a much bigger injection in actual fact.

In what has become known as a spectacular case of the USA running away from what they preach, this September, 2008 the USA Central Bank, supported by the American Treasury, extended a last minute US$85 billion lifeline to the insurance giant, American International Group (AIG) which faced definite collapse in the face of poor assets and liabilities management. This eclectic life-boat to AIG was on the heels of the USA Central Bank and Treasury having extended unprecedented support to Bear Stearns, Fannie Mae and Freddie Mac for they had been deemed as "too big to collapse" from the American financial garden.

In the case of Bear Stearns, the Fed took US$29 billion of the investment bank’s mortgage-related assets as collateral for a Fed loan to JP Morgan Chase, which then agreed to acquire Bear Stearns. In the case of Fannie Mae and Freddie Mac, the USA Treasury Department placed the companies under the caretakership of the USA government and explicitly backed the US$5,3 trillion in the mortgages that the two companies owned or had guaranteed.

Indeed, the idea of the formation of a special stand alone "ambulance agency", more like Zimbabwe’s FISCORP (Private) Limited owned by the Reserve Bank of Zimbabwe, was floated on Tuesday September 16, 2008 in the USA House of Representatives by Representative Barney Frank, Democrat of Massachusetts, who head the Financial Services Committee of the House of Representatives. The ambulance unit was to deal with "Toxic Debt".

In doing all these interventions, which were topped up by the announcement by the Fed on 19 September, 2008 of yet another hefty US$50 billion rescue package into the USA financial system, under what has come to be called the Toxic Debt Fund, the world has been left stunned by the spectacular "U-turn" by the USA Central Bank away from the cannons of the Washington Consensus, and moving more towards the pragmatic realm of eclectic financial management.

In doing what they did, the USA Central Bank and the Treasury have indeed awaken to the reality that orthodoxy does at times fall short in addressing the practical imperatives that confront policy makers in the contemporary business world.

The month of September, 2008 will indeed go down in history as the time when the eyes of the world were opened to the fallacies and misconceptions around the subject of how far market forces and the operations of the invisible hand can be wholly trusted to solve the vices in financial and commodity markets as they intersect with the day to day socio-economic imperatives. Cited in the International Herald Tribute of September 18, 2008, Nelson D. Schwartz asked "is the United States no longer the global beacon of unfettered free market capitalisation?"

Schwartz further concludes in the same article that "in extending a last minute US$85 billion lifeline to AIG, the troubled insurer, Washington has not only turned away from decades of rhetoric about the virtues of the free market and the dangers of government intervention, it has also likely under cut future American efforts to promote such policies abroad".

Thursday, September 18, 2008, the Fed injected in excess of US$180 billion in credit into the American financial system. To those who know Financial Programming and Control Programmes, it does not require much imagination that such injections are in essence money printing at its best.

The UK Central BANK intervened too

Faced with a deepening financial crisis, the Bank of England, on 21 April, 2008 unveiled a £50 billion (or around US$100 billion) Special Liquidity Scheme, which was meant to prop up an ailing mortgage market. As the Special Liquidity Scheme failed to measure up to its task, on September 2, 2008 the British Prime Minister, Mr Gordon Brown unveiled yet another dose of unorthodox interventions to save the housing market in the UK. The package included the support where home buyers will not have to pay stamp duty on properties costing £175 000 or less for 12 months. Over and above this, the British Government offered five-year interest free loans of up to 30 percent of a property’s value for first time buyers of new homes in England, among other interventions.

Zimbabwe is not alone

The current global financial turmoil has indeed, vindicated the macro-economic policies Zimbabwe has been following, particularly those by the Reserve Bank of Zimbabwe, which seek to move away from orthodoxy when conviction reigns superior to convention.

The questions the world must ask the IMF, the USA and the UK Central Banks are:

-What has happened to the doctrine of free market forces?

-Aren’t the billions of hard currency being poured in the money and capital markets in themselves quasi-fiscal measures?

-Where is the difference between what the Reserve Bank of Zimbabwe is doing and what the USA Fed is doing? and

-Knowing that the USA as of August, 2008 had a trade deficit of at least US$700 billion in its balance of payments, aren’t the interventions by the Fed and the USA Treasury an additional admission that the USA financial system is failing to pay its way in the global market place?

As world financial markets get to terms with the policy ideological shift by the USA and Europe, it is perhaps time that the world also looks back to the Asian Financial Crisis of the mid-90’s.

At that time, the IMF, along with the other sponsors of the Washington Consensus vehemently bashed the Asians for "attempting to save bad institutions through bail outs". The advice given to Asia by the "experts" was, "do not bail out failed institutions".

Now the year is 2008 and the American financial system is in a mess, what do we see our yester-year experts doing? They are doing exactly what they were condemning when others were doing it; that is engagement by Central Banks in eclectic quasi-fiscal operations when it is deemed necessary. Some may be quick to defend the USA and say that they are rich and can, therefore, afford to run quasi-fiscal operations.

The truth, however, is that poverty and the contagion stresses of financial instability know no bounds.

Rich as the USA might be considered, as of September, 2008, there are millions of families that have sleepless nights pondering about how they would have a house for shelter; whilst others are pondering on their jobs lost due to company liquidations. There are millions of Americans who are sinking in gruelling debts. There are millions of Americans and Britons who are failing to pay their basic health-care bills and education for their children.

Indeed in America, there are millions who are now failing to pay for four square meals in a day due to the rapid rise in global food prices, at a time some companies are folding due to insolvency problems.

Against all this stark reality, one thread of a new order in the realms of macro-economic and financial management is absolutely clear and that is, the IMF and the sponsors of the unfettered free market Washington Consensus need to have a re-think.

The world economy of today is far transformed and different from that which existed back in 1945 when the IMF was born out of the ashes of World War II.

Today’s world requires financial managers who stand ready to confront traditional orthodoxy with needful innovations when the signs of the times demand so.

In conclusion, it is imperative that tribute be paid to the Fed Chairman, Mr Ben Bernanke and the USA Treasury Secretary, Mr Henry Paulson for their pragmatism in seeing the virtues of quasi-fiscal interventions where imperatives on the ground dictate that such extraordinary interventions be invoked.

Indeed, for small countries like Zimbabwe, it is an empirical misfortune that when their central banks print money, that money can only buy from local sources, while when the USA Central Bank prints US dollars, the next minute they can shop oil, raw materials, food and many other essentials from the world at large. Watch their BOP deficits!!

That way, the Fed’s act of printing money will see the money chasing not too few goods at home in the USA, but rather chasing many goods in world markets, leaving their home inflation numbers intact.

Is it not a question the world should start to ask why it is the case that of the around US$840 billion total cash reflected in the Federal Reserve as having been printed and released into the USA system, around two thirds of this cash, or around US$560 billion is circulating outside the USA economy? That cash was printed by the Fed, and because over the years, the world has conventionally accepted the US dollar as a medium of exchange, a note printed today can cross the American border the next day and buy goods and services anywhere in the world for the Americans. To see the underlying forces on all this, one only needs to look at the USA’s fiscal deficits and their Balance of Payments Trade Deficits. They tell a story!

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