Normalize International Relations Before Seeking Financial Bailout

Zimbabwe’s fractious relationship with the international community is the centre of a turned down appeal for a financial rescue package by the Paris Club.

In a letter addressed to Mthuli Ncube, the Paris Chairperson of the Paris Club of sovereign creditors, Odile Renaud Basso, has also told the government to make a tangible commitment to multilateral debt clearances.

This response follows an appeal by Prof Ncube, which detailed how the country is on the brink of a health and economic catastrophe because its debt arrears mean it cannot access foreign lenders, in a leaked letter to the International Monetary Fund (IMF).

The letter dated April 2, 2020, regarding Zimbabwe’s current situation, was also copied to the World Bank, African Development Bank, European Investment Bank and the Chair of the Paris Club of sovereign creditors.

Now the Paris Club has responded urging Zimbabwe to normalize relations with the international community and to implement substantive and sustainable political reform, including a sustained dialogue on economic development.

Basso, who is also Director-General of the French Treasury, wrote to Prof Ncube that clearance of arrears to financial institutions, are key as no formal discussions on debt restructuring will proceed without a tangible progress on this front.

“Paris Club members insist, however, on the fact that the Government of Zimbabwe’s desire to normalize its relations with the international community can only advance following the implementation of substantive and sustainable political and economic reforms, in particular regarding the respect for human rights, especially freedoms of assembly and expression.

“Before any Paris Club treatment, a prior condition is multilateral arrears clearance.

“The normalization of relations, including any potential debt treatment, can only begin once Zimbabwe has cleared all arrears to International Financial Institutions, in particular to the World Bank and the African Development Bank.

“Once the country has met these criteria, it can request to enter formal discussions with the Paris Club on debt restructuring,” reads part of the letter.

Zimbabwe’s so called new dispensation has been on a diplomatic onslaught, including hiring lobbyist to entice the international community onto the Zimbabwe is open for business’ mantra with little success as power excess including security sector brutality have persisted.

Since the 2017 ouster of former President Robert Mugabe, the new dispensation has sought to reassure the international community of its commitment to economic and political reforms, but this has only been partial according to the Paris Club.

The Paris Club said ‘they welcome the partial progress made by Zimbabwean authorities in implementing economic reforms in some areas in 2019, in particular on fiscal consolidation’ and were ready to support ‘positive developments if they are substantive and sustainable’.

It said Zimbabwe has also missed an opportunity by failing to adhere to an IMF, Staff Monitored Program (SMP) covering the period from May 15, 2019 to March 20, 2020 aimed at reforming government policies to promote macroeconomic stability.

“Paris Club members insist, however, on the fact that the Government of Zimbabwe’s desire to normalize its relations with the international community can only advance following the implementation of substantive and sustainable political and economic reforms, in particular regarding the respect for human rights, especially freedoms of assembly and expression.

“To this end, successful implementation of an International Monetary Fund (IMF) Staff-Monitored Program (SMP), when the country has demonstrated its readiness to begin such a program, would be an important first step, as would be progress on political reforms.

“Poor performance under the SMP of May 2019 is a missed opportunity in this regard. We encourage you to press forward with a credible reform program to stabilize the economy and strengthen economic governance,” wrote Basso.

 

 

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