Last year, I
spent June rambling the roads of Zimbabwe’s Eastern Highlands mountains. The
human warmth of the Shona people and physical beauty of the rural landscape
are world-class. But last June was a tragic time because of the decay of
Robert Mugabe’s once-liberatory nationalist politics. Exhausted, corrupted,
desperate, and prone to violence, the Zimbabwe African National Union Zanu(PF)
barely held off a challenge by the nine-month-old Movement for Democratic
Change (MDC), winning just over half the 120 contested parliamentary seats.
socialist vision evaporated long ago, although he calls forth radical rhetoric
periodically to confuse matters. “Talk left, act right” is the chosen formula,
as Zanu(PF) continually seeks to revive popular memory of a time when the
party was indeed a fish in the sea of the masses, while concurrently
repressing those who protest vigorously from the left.
example, the Zimbabwe National Students’ Union president Nkululeko Sibanda was
tortured by Mugabe’s secret police, the Central Intelligence Organization,
after the CIO accused Sibanda of “working with the MDC to topple the
government.” Sibanda is leading widespread student protest over unaffordable
university fees and privatization of campus facilities and services.
The topic of
the gloomy present was replaced by the question of Zimbabwe’s very uncertain
financial future. I flew from Jo’burg to Harare, drove east for four hours and
joined a dozen civil society strategists in a seminar in the mountains
We gathered to
debate the country’s most durable economic problem, the buildup of foreign and
domestic debt: $5 billion and $1.5 billion, respectively. The World Bank
considers Zimbabwe only “moderately” indebted, but the burden of repayment is
so brutal that Mugabe finally said no around a year ago.
For two NGO
activists, Davie Malungisa of the Zimbabwe Coalition on Debt and Development
(Zimcodd) and Eunice Mafund- ikwa of the African Network on Debt and
Development (Afrodad), the protests they joined at the spring meetings of the
World Bank and IMF over the past two years took on new meaning as we reviewed
a new debt study. The report’s author, Masimba Many- anya, was formerly a
chief economist for Mugabe’s finance ministry but quit to join the trade union
movement in 1999.
founded last year by the main organizations in the social justice, church,
women’s, NGO and trade union movements. “Debt is already genocidal in
Zimbabwe,” insists Malungisa, “because so few of our urgent social priorities
can be met. The last budget saw a 26 percent crash in health spending, for
Malungisa, “Debt is a threat against which all Zim- babweans can and must
unite. Otherwise we face a pauper’s burial. We’re even joining the World Bank
Bonds Boycott campaign to drive this point home where it counts: Jim
the others are way out ahead of the political curve here. In next April’s
presidential elections, the MDC will probably win, vindicating the political
courage of its founders, the Zimbabwe Congress of Trade Unions and its
supporters, the mass of the urban poor, the youth, and the working classes.
But here arises
another hurdle. In February 2000, the impoverished young party also welcomed
big business, white farmers, and even overseas supporters with imperialist
designs, who gave enthusiastic financial and logistical support once the MDC
defeated Mugabe by 55 percent to 45 percent in a referendum over a new
If the MDC
becomes the ruling party, it is likely to be pressured into adopting hard-core
neoliberal economic policies.
adopted some interesting emergency policies, which any genuinely progressive
government would want to consider amplifying. In particular, three recent
government decisions are considered insane by conventional economists: running
such a relaxed monetary policy since January that interest rates (15 percent)
are at least 45 percent below the inflation rate; pegging the currency at 55
Zimdollars to one U.S. dollars when the black market rate is at least double
that; and servicing foreign debt only haltingly.
We need to look
at these objectively and the post-independence context is crucial. My own
theory is that the foreign debt burden and the failure of the 1991-95
structural adjustment program designed by the World Bank together drove Mugabe
around the bend, in classical nationalist zig- zag mode, in mid-1997.
1995, the Bank judged Mugabe’s turn to neo-liberalism as “highly
satisfactory.” Most macroeconomic, sector, and financial objectives were
“substantially” achieved (again, the highest mark), said an official Bank
In reality, the
formerly well-balanced economy became deindustrialized and massively indebted.
The social wage collapsed as budget cuts bit deep. Gender, race, and class
inequity soared. Zimbabwe also became much more vulnerable to international
shocks. Over the period 1990-95, gross domestic product fell by a fifth, from
$8.50 billion to $6.80 billion, as foreign debt soared 55 percent, from $3.25
billion to $5.05 billion, according to the World Bank’s own debt tables.
grassroots protest was relatively erratic and easily contained. Finally in
1996-97, trade unions, civil servants, and farmworkers all challenged Mugabe
from the left.
Mugabe was berated by several thousand of his former comrades from the
1960s-70s struggle who had received none of the spoils of liberation. In late
1997 he struck a deal with these war veterans, giving them a few thousand
dollars as a pension in exchange for allegiance.
Within a year,
some of the most aggressive war vets had become a quasi-paramilitary force,
harassing trade unionists and others who staged periodic strikes. (Within two
and half years, the war vets had staged bloody occupations of more than 1,000
white- owned farms, which aided Mugabe’s 2000 election campaign by reviving
nationalist memories of the need to rid settlers from the best land.)
In 1998, the
last full year Mugabe authorized repayment of the foreign debt, there was only
one other country in the world (Brazil) paying higher debt-servicing charges
in relation to its ability to earn exports. (That fact, embedded deep in the
World Bank’s latest Global Development Finance report, has never been reported
years of spending $650 million annually on debt servicing, Zimbabwe coughed up
$981 million in 1998, against just $2.57 billion earned from exports, an
untenable ratio of 38 percent. But even though over the period 1994-98,
Zimbabwe had paid $910 million more in debt servicing than it received in new
loans, the debt actually rose over those five years from $4.54 to $4.72
billion. (At the same time, grant aid fell by half, from a peak of $310
million in 1995 to $150 million in 1998.)
repayment scheduling and the tyranny of compound interest, Mugabe found
himself sliding backwards on the debt treadmill. Finally in early 1999, he
jumped off, refusing to pay the IMF and Bank, thereby joining a list of
rogue-financial states like Yemen, Iraq, and the Democratic Republic of the
The costs of
short-term IMF “help” now finally outweighed the benefits. Those costs
included three main conditions attached to $200 million in IMF credit promised
in 1999. Mugabe was ordered to immediately reverse the only redistributive
policies he had adopted in a long time, namely:
- (a) a ban on holding
foreign exchange accounts in local banks (which immediately halted the
easiest form of capital flight by the country’s elites)
- (b) a 100 percent customs
tax on imported luxury goods
- (c) price controls on
staple foods in the wake of several urban riots.
the IMF, and was cut off after the first small tranche of the loan. But hatred
of the Zanu(PF) leader continued to grow in the cities when he deployed 10,000
troops to the DRC war, partly as an act of solidarity against the U.S.-backed
Ugandan/Rwandan invasion of the east of the DRC.
Zimbabwe’s intervention was soon unveiled as a ghastly mercenary-style
arrangement with the soon-to-be-assassinated Laurent Kabila. The deal allows
Harare’s military and state elites to loot the DRC’s cobalt, copper, and
IMF permitted Mugabe to continue his DRC adventure at a crucial negotiating
stage in mid-1999: “We have had assurances” about Mugabe’s plans for further
deployment, an IMF source told Agence France Press. “If there is budgetary
overspending, there will be cuts in other budget sectors.”
In other words,
health, education and other badly defended sectors would suffer more pressure
on behalf of Mugabe’s military cronies.
These are some
of the reasons Malungisa says Zimbabwe’s foreign debt should be considered
“odious,” not subject to repayment by a democratic successor.
loans that Robert Mugabe signed for during the 1980s and early 1990s backed
the ruling Zanu(PF) party’s worst, most self-destructive tendencies, and were
contracted in a non-transparent manner contrary to society’s interests.
A full audit of
Zimbabwe’s foreign debt would reveal systemic failure. Not only did loan
conditionality throughout the post-independence period screw the poor. The
credits also created space for degeneracy by elites, who used the hard
currency to import inappropriate luxury goods and unsustainable machinery, to
be repaid by the future generations.
But the days of
easy foreign credit ended by the mid-1990s, so government turned increasingly
to domestic borrowing. The finance minister projected the interest bill on
local and foreign loans late last year to reach a phenomenal 48 percent of the
annual government budget—of about $2 billion—in 2001. (That’s after Mugabe
absurdly projected privatization revenues of $200 million this year, a promise
that no one believes he’ll keep since parastatal corporations are vital to his
political patronage system.)
to make key foreign debt payments since 1999, the government is now $600
million in arrears. Zimbabwe finance minister Simba Makoni promised the World
Bank and IMF he’d spend about that sum this year to repay foreign loans, but
it seems that Mugabe won’t let him.
Makoni, who is
considered a reliably neoliberal technocrat, conceded to the World Economic
Forum meeting in Durban earlier this month, “We are committed to fulfilling
these obligations, but it’s clear that our economy is in no state to generate
sufficient funds to clear these arrears.”
Even if the
debt was serviced, the IMF’s Stanley Fischer told Makoni that there wouldn’t
be any new loans until Mugabe fulfills a set of new conditions, including
getting war vets off the commercial farms they occupied last year.
prospect of net repayment outflow, Mugabe appears justified in ignoring IMF
repayment demands and instead hijacking a portion of foreign exchange earned
by tobacco and other exports, for emergency purchases, including fuel. Even
so, the price of petrol, which has been in very short supply this year, was
raised overnight by 70 percent. (The unions have called a two-day general
strike for the beginning of July to reverse the increase.)
geopolitical/economic question immediately arises: in the wake of having
effectively defaulted on foreign debt and now facing chronic foreign exchange
shortages, what further material punishment can the world economy impose on
Aid has been
withdrawn by most donors, or redirected to civil society. Trade sanctions
proposed by Jesse Helms—which are not supported by the Zimbabwean
opposition—would in any case not bite much harder.
country that could really finally push Zimbabwe over the economic cliff if it
wanted to, is South Africa, through which most exports and imports flow. But
Thabo Mbeki has repeatedly come to Mugabe’s aid in various ways (although it
appears that Pretoria is now finally ready to recognize the Movement for
Democratic Change as the likely next government).
So Zimbabwe is
down but not out. Periodic shortages—including essential drugs and
California-style electricity load-shedding—contribute to the misery of daily
justifies maintaining an official exchange rate half that which is available
on the black market, on grounds it can’t afford to pay for vital imports at
the market rate. The private sector reverts to the higher rate for its own
imports, while government insists on charging a quarter of all hard currency
revenues from exporters, at the lower rate.
the 15 percent rate of interest government decided to pay domestic creditors
for short-term loans, at a time inflation is roaring above 60 percent. The
state forces institutional investors to purchase Treasury Bills, and in the
process spreads the pain of debt payback to relatively wealthier savers who
get a negative rate of return, after discounting inflation.
The upside of
the negative real interest rate is that only half the amount that was
anticipated (nearly $1 billion) will be required to service domestic debt this
year. Productive investment can be financed more cheaply than at any time in
the last decade, for those very rare businesses interested in expanding during
the midst of depression.
institutional investors aren’t getting the return on interest-earning assets
that they want, they’ve pushed unprecedented funding into the Zimbabwe Stock
Exchange, which was the fastest rising in the world over the last year. The
stocks they’re buying are absurdly overvalued, so they’ll lose again when
normalcy returns and the market crashes.
contradictory policies aren’t tenable over the medium-term. But if the MDC is
ruling Zimbabwe next year it may have to drop the overall neoliberal formula
for one simple reason. The debt has become so oppressive that there is only
one way out: defaulting the foreign lenders and cheating the local
institutional investors (and by extension savers, including some workers whose
pension funds are now shrinking quickly).
three other residual challenges:
- redirecting financial
capital, which is now flooding away from interest-bearing assets into the
- protecting the pensions
of ordinary workers
- shielding the poor from
inflation, for instance through well-conceived subsidies on basic needs
Even if he
acted on these forcefully (which he won’t), it’s hard to see Mugabe holding on
to power, no matter how much he intimidates the rural electorate to again vote
Zanu(PF). He has lost three key nationalist militants—defense minister Moven
Mahachi, employment minister Border Gezi, and war vets leader Chengerai Hitler
Hunzvi—in unexpected deaths (two accidental car crashes and illness,
respectively). Rumors have circulated that a Zanu(PF) military clique is
anxious to take over, possibly via a coup, if Mugabe continues to falter.
is also waning for the 77-year-old president. Controversial information
minister Jonathan Moyo, on whom Mugabe has come to rely for spin doctoring,
had his wings clipped this month by cabinet colleagues. The judiciary still
leans against the ruling party. A string of smaller elections coming up will
tire Mugabe in the run-up to the presidential race.
But matters are
not much rosier for the opposition. Former trade union leader Morgan
Tsvangirai is likely to be the MDC’s candidate for president, although Mugabe
has him awaiting trial for threatening violence last September, which
potentially could disqualify Tsvan- girai from the election. And even if the
MDC wins next April, it would not control parliament immediately, and would
have an enormous struggle to establish political stability in such a divided
struggle, though, looks to be about ten months away: if the MDC can extricate
itself from the grip of big money and orthodox economic ideas (and right now,
I’d bet no), how would they slay the debt monster? Tsvangirai, after all, said
in an uncharacteristically slippery way last year, “I still hate the World
Bank and IMF, like I hate my doctor.”
If the MDC
can’t shake off neoliberalism, will civil society groups offer as vibrant
advocacy on socio-economic rights as they do today on political and civil
Late at night,
next to the blazing Bvumba fireplace as our seminar came to an end, Davie
Malungisa, Eunice Mafundikwa, Masimba Manyanya, and the other folks chatting
over local beers swore that in coming months, they’ll be at the forefront of
linking Zimbabwe’s best grassroots activists to the international anti-
neoliberal movement. Z
Bond is an economics journalist in South Africa. He is with the Alternative
Information and Development Center.