Thursday, February 26, 2009

African Development Bank Praises Zimbabwe Plan

African Development Bank praises Zimbabwe plan

Thu, 26 Feb 2009 16:24
CAPE TOWN, Reuters

Zimbabwe has made an impressive start on an economic recovery plan which warrants support from the international community, African Development Bank President Donald Kaberuka said on Thursday.

He told reporters on the sidelines of a summit of southern African finance ministers in Cape Town that the AfDB was prepared to set up a donor meeting for Zimbabwe, but its $5 billion foreign debt needed to be cleared to secure more aid. "It will require that Zimbabwe comes forward with a credible economic programme.

Now the first steps I have seen, listening to (Zimbabwean Finance) Minister Tendai Biti, is quite impressive and it merits support," Kaberuka said. The new administration urgently needs to tackle an economic meltdown that has led to the world's worst hyperinflation, food shortages and a cholera epidemic. Prime Minister Morgan Tsvangirai said last week it would cost as much as $5 billion to repair the economy.

Zimbabwe's unity government will be depend heavily on foreign aid to ease the decade-old economic crisis. But Western donors say money will be provided only when a democratic government is created and economic reforms implemented.


Kaberuka called on Zimbabwe to meet its external debt repayments to the Paris Club of government lenders, international finance institutions and other creditors to secure more financial help. "Now that can done fairly quickly. It's complex but it's not undoable," Kaberuka said.

John Robertson, a leading private economic consultant in Harare, said donors should take charge and drive policy reforms and then base aid flows on government compliance. "It's some kind of vicious circle.

The economy is in doldrums and cannot contribute to any debt repayments until it gets off the ground, and it cannot get off the ground without some massive outside help," he said. "You have to get the economy on a programme to produce again before you can get Zimbabwe out of the woods. It's going to be hard, and the government has to pass the credibility test."

Mugabe, blamed by critics for the collapse of the once-promising economy, expressed doubts over Tsvangirai's policy of paying civil servants in foreign currency, instead of inflation-ravaged Zimbabwean dollars, under the recovery plan. "When it was first mooted, the idea of paying people in U.S. dollars, I was against it and I still am because we just do not have enough (foreign currency)," said Mugabe.

"It is a problem that confronts us even now." The veteran leader's comments, part of an interview with state television to be broadcast on Thursday, were carried by the state-run Herald newspaper. Economic woes have been made worse by the suspension of international aid, mainly over policy differences with Mugabe, in power since independence from Britain in 1980. South Africa, the continent's biggest economy and a regional diplomatic power, is well placed to help Zimbabwe and has already given it 300 million rand ($30.08 million).

President Kgalema Motlanthe has floated the idea of Zimbabwe adopting the South African rand in a bid to stabilise its economy. Analysts doubt Harare would accept because it would mean the government giving up some control of the economy. "Personally, I think we should revalue the Zimbabwe dollar in a manner that fixes its relationship with the rand for a while. We will protect it for a while, for a while as we increase production.

But we should protect it," said Mugabe. South African Finance Minister Trevor Manuel said reconstruction in Zimbabwe over the next 10 months would cost $2 billion, in two packages. "One they are looking at is a self-liquidating loan to ensure that you can stimulate retail and all kinds of things," he told SAfm radio. "The other detail, about $1 billion for emergency education, health, (and) municipal services....," he said.

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